Precision Camshafts Share price and Fundamental Analysis

Company History

Precision Camshafts is one of the world's leading manufacturer and supplier of camshafts, a critical engine component, in the passenger vehicle segment. The company supplies over 150 varieties of camshafts for passenger vehicles, tractors, light commercial vehicles and locomotive engine applications from its manufacturing facilities in Solapur, Maharashtra. The company mainly caters to the passenger vehicle segment. The company's aggregate capacity is 15.6 million camshafts.

Precision Camshafts is a complete solutions provider for camshafts manufactured by different technologies, earning a major chunk of its revenue from the export of camshafts to various OEMs, directly and indirectly. It is a niche player in the camshaft segment with a global market share of 8% to 9%. It is also the largest suppliers in the domestic market with a market share of ~70%, and the preferred suppliers of casting camshaft to some of the global and domestic Original Equipment Manufacturers (OEM), including Maruti Suzuki, Hyundai (India), Tata Motors and M&M, while OEMs such as General Motors and Ford constitute its largest global customers. Focus on technology (product and process) has enabled the company to gain a strong foothold in the domestic and global markets.

The company has two state-of-the-art manufacturing facilities - an EOU unit and a domestic unit - both situated at Solapur, Maharashtra. The EOU unit consists of four foundries and three machine shops and products manufactured at the EOU unit are primarily exported to overseas customers. The domestic unit consists of one foundry and one machine shop and it caters to domestic customers from this manufacturing facility.

Precision Camshafts Ltd was incorporated as a private limited company on June 8, 1992 in the state of Maharashtra at Mumbai. The company was converted to a public limited company, and accordingly the name was changed to Precision Camshafts Limited' on August 1, 1997. It is promoted by Mr. Yatin Shah and Dr. Suhasini Shah, who have over 20 years of experience in the critical engine component manufacturing and have established strong business relationships with marquee global OEMs. They are first generation entrepreneurs who started the business of manufacturing of critical engine component in 1992.

In order to strengthen the business operations in Asia, the company has entered into two joint ventures with NSPCL, the first, Ningbo Shenglong PCL Camshafts Company Limited, for machining of camshafts and the second, PCL Shenglong (Huzhou) Specialised Casting Company Limited, for setting up a foundry in China. The machine shop at Ningbo, China commenced production in April 2013.

The company has also entered into an exclusive agreement with EMAG, a German machining and tooling process company, for transfer of certain know-how and technology in order to strengthen its' foray into assembled camshafts and expand the business operations in the European market.

The company successfully completed the Initial Public Offer (IPO) during the financial year ended 31 March 2016. The IPO was open for subscription during the period from 27 to 29 January 2016. The IPO comprised of a fresh issue of 1,29,03,225 equity shares and an offer for sale of 91,50,000 equity shares by selling shareholders for Rs. 186/- per equity share (inclusive of premium of Rs. 176/- per share). The shares were listed on both BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) with effect from 8th February 2016.

During the financial year ended 31 March 2016, the company supplied over 9 million units of camshafts and serviced various customers across different geographies including the United States of America, Brazil, the United Kingdom, Germany, Austria, Hungary, South Korea, Spain, Uzbekistan, China besides India.

During the year ended 31 March 2018, Precision Camshafts made investment to the extent of Rs 2214 Lakhs in its wholly owned subsidiary company PCL (International) Holdings B.V. Netherlands' (PCL Netherlands). The Equity contribution made in PCL Netherlands was utilized for strategic acquisitions. The existing customer base of the Company is predominantly located in Europe, hence to get future orders and to establish research and development PCL Netherlands would add value to the business of the Company. During the year under review, Precision Camshafts acquired 95% Equity Share Capital of MEMCO Engineering Private Limited, Nashik, Maharashtra. The acquisition was done on 10th October, 2017 for an enterprise value of Rs 3804.35 lakhs. MEMCO is engaged in the business of manufacturing fuel injection components for conventional CRDi diesel engines, brake components, high pressure diesel injector connectors for naval ships and high precision instrumentation components. MEMCO enjoys long term relationships with marquee global customers like Bosch, Delphi, Endress Hauser and Giro. For the financial year ended 31 March, 2018 the Revenue from Operations of the Company was Rs 3472.44 Lakhs and Profit After Tax was Rs 188.09 Lakhs on standalone basis.

With intention to grow the company inorganically, the company identified a similar allied product like Camshafts, Bearing Caps, Engine Brackets and Prismatic Components and acquired through its Wholly Owned Subsidiary, PCL (International) Holdings B .V. Netherlands (PCL Netherlands) 76% Shares in M/s MFT Motoren und Fahrzeugtechnik GmbH, Germany (MFT) on 23 March 2018 for a sum of Rs 2500 Lakhs. Pursuant to Share Purchase Agreement, the Company would acquire balance 24% Shares in the Financial Year 2021 based on the performance in the Financial Year 2020. MFT is engaged in the business of manufacturing Balancer Shafts (i.e. Fully Machined, hardened and balanced vertical and horizontal Balancer shafts), Camshafts, Bearing Caps, Engine Brackets and Prismatic Components (i.e. brake and chasis components, machining of all casting materials). MFT is a financially strong company with a turnover of about Rs 16000 lakhs in the year 2017. MFT enjoys long term relationship with marquee global customers like Volkswagen, Audi, Opel, Westfalia, Hatz, Suzuki etc. With acquisition of MFT, it would strengthen the company's niche machining capabilities and diversify in new product range to cater to the customers in European markets.

The company has dedicated a new 2 million machining capacity to cater to Ford's Dragon project. Of this, 0.25 million machining capacity has been commissioned, from which a supply has started in FY2018. The company has begun delivering ductile iron machined camshafts to Toyota, with a monthly run rate of 18,000 camshafts for Innova and Fortuner models.

Precision Camshafts through its Wholly Owned Subsidiary PCL (International) Holding B.V., Netherlands incorporated a Subsidiary Company in Brazil under the name 'PCL BRASIL AUTOMOTIVE LTDA' in the state of Sao Paulo, Brazil (PCL Brazil) on 10 May 2018. PCL Brasil to manufacture machined camshafts to cater the needs of customers in Brazil and South America.

Precision Camshafts through its Wholly Owned Subsidiary PCL (International) Holdings B .V. Netherlands (PCL Netherlands') acquired 51% Shares of EMOSS Mobile Systems B.V., Netherlands ('EMOSS') on 17th May, 2018 for R 5800 Lakhs. EMOSS is a one-of-a-kind business that designs, develops, produces and supplies complete electric powertrains for trucks, busses, military vehicles and heavy equipment. EMOSS business model includes conversion of diesel trucks into ready to use electric trucks. The company also manufactures 'ready to assemble modular kits' which are assembled onto the chassis. EMOSS provides an end to end solution to its customers which include research and development, engineering, production, testing, certification, delivery and post-sale service. EMOSS also provides real time power management and tracking via an integrated cockpit setup. The trucks powered with Electric Drivelines can carry a maximum payload of 50 tons with a mobility of up to 350 km which may be extended beyond 500 km with long range extenders developed by EMOSS. The acquisition will enable the company to foray into electric mobility a one stop solution for electric powertrains by providing tailor made engineering services on electric vehicles and equipment's. Acquisition to pave access to electrical mobility markets such as Europe, North America and Australasia. With this acquisition the Company forays into electric mobility a one stop solution for electric powertrains. EMOSS is now a step-down subsidiary of the company.