Pricol Limited

I examined the nine-month financial statement of Pricol Ltd.
In summary,
a) The sales have increased marginally (7.4%) over the nine-month period in the last FY (2004).
b) Correspondingly, the PBT have fallen significantly (from 43.9 crs to 28.6 crs; a drop of 34.8%)
c) Notice the rise in interest cost. The nine month interest cost is at 8.43 crs while the financing cost was 4.87 crs in the previous FY. (a 73% rise)
d) Net profit after tax, dep and interest (PAT) is at 22.9 crs while it was 28.09 crs for FY2004-05.

The balance sheet reads ...
Share Capital - 9.00 crs
Loans - 155.90 crs
Investments - 14.75 crs
Net CA - 86.13 crs
FV - 1.00 rupees per share
Dividend per share - 1.00 rupee
CMP - 39.75 rupees/share (15-Mar)

Thus, the NCAV (as per 2004-05 balance sheet would come to negative 7.75). Estimating trends in FY2005-06, I find ...
1. The profits for the year should be around 29 crs. This would mean a P/E of 12.08 on todays CMP.
2. There is no margin of safety here. The NCAV is infact, negative.
3. The company would be in a position to give a dividend of 75 paise only this yr due to the lower earnings. This comes to a 1.89% dividend yield.
4. There is no news of value on the stock too - although it has decent volumes on the bourses.

My take - this stock will not move much from this level for the next few weeks. Further improvements in the stock price will be a function of news or increase profitability. There is no hidden value in the stock that is visible.

PS: I think the company is resorting to some creative accounting practices here. Picture this (look at the annual report) -
> In 2003-04, the company had borrowings of 115.23 crs on 31-Mar-2004 and had accounted for an interest cost of 8.02 crs. Which means we are looking at a financing cost of 7.5%. Fair.
> In 2004-05, the company had borrowings of 155.90 crs on 31-Mar-2005 and had accounted for only 6.83 crs .. a financing cost of only 4.4%. At 7.5%, this should have been around 11.69 crs.
> For 2005-06, the interest cost would close at close to 13 crs. I would like to assume that the increased financing cost is making up for the lower accounting of interest cost in the previous financial year. So, loans would not have increase too much this year. Lets estimate it at around 160 crs.