Paramount Communications - Targets Rs 1000 Crore Revenue With 9-10% Ebitda Margins In FY24: Anand Rathi

Anand Rathi Report

One of India’s leading cable and wire manufacturing companies, which serves prestigious public and private sector clients, Paramount Communications Ltd. has two integrated units, one each at Rajasthan and Haryana, over 500 institutional clients, more than 2,500 stock keeping units and a widespread distribution network (more than 10,000 retail touch points).

It aims at Rs 10 billion revenue in FY24, which would be 26% higher YoY. The strong performance targets can be attributed to strong domestic demand and rising exports, which made up 50% of its FY23 revenue and which has been rising since FY22.

Key growth drivers

• Tapping growth opportunities in transmission and distribution since it has the mandatory pre-qualifications from the transmission and distribution sector.

• Orders can come from various sectors like energy, transportation, rail electrification, metro-rail, factories and buildings.

• Expansion across Australian and European markets.

Valuation

We do not cover Paramount. Hence, we do not have estimates and a rating on it. At the current market price, the stock trades at 26 times the FY23 earnings per share of Rs 2.4. More than 90% of its outstanding debt is with the asset reconsturction company.

A significant reduction in this debt or swapping of ARC debt with any leading bank could be an important trigger to watch.

Swapping of debt with a bank could result in higher finance costs and is an important monitorable.

Key risks:

• Significant delay in repaying its debt with the ARC can be an important risk to watch.

• Offtake is critical as Paramount would be competing with stronger peers with non-levered balance sheets.

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