Avoid PG Electroplast IPO: MLR Research

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MLR Research has recommended investors to avoid PG Electroplast IPO considering its expensive valuations and weak fundamentals. The company has fixed issue price band at Rs 190-210 a share.

Speculative interest on listing cannot be ruled out on account of its small issue size.

Company Background

PG Electroplast is into manufacturing and assembling of consumer electronic products like colour television sets (CTVs) & components, DVD players, air conditioners among others for OEMs. As part of backward integration, the company also manufactures plastic injection mouldings and Printed Circuit Board (PCB) assemblies for CTVs, DVD players and Compact Fluorescent Lamps (CFL).

The manufacturing facilities of PGEL are located at Greater Noida, Uttar Pradesh and Roorkee, Uttrakhand with total installed capacity of 16 lakh pieces p.a. for PCB assemblies for CTVs and DVDs. 6.6 tonnes p.a, for plastic injection mouldings, 16.1 lakh pieces p.a. for CTVs, 3 lakh pieces p.a. for DVDs, 30 lakh pieces p.a for CFL assemblies and 30 lakh pieces p.a. for PCB assemblies. PGEL's Roorkee plant enjoys tax benefits under Industrial Policy, 2003 by the Central Government.

Mr. Promod Gupta is the promoter of the company. He is supported by his three sons namely Mr. Anurag Gupta, Mr. Vishal Gupta and Mr. Vikas Gupta having experience of more than 15 years each in the electronic manufacturing industry as executive directors of the company.

Utilisation of issue proceeds

¨ Expansion of plastic injection moulding facility  at Greater Noida (Unit III) and Ahmednagar (Unit IV) – Rs 51 Cr

¨ Prepayment of term loan – Rs 24 Cr

¨ To meet long term working capital requirements – Rs 15 Cr

Valuations

The company’s market cap is Rs 345 crore on an upper price band of Rs 210. PGEL is asking for a valuation of 17.4-19.3 times its FY11 EPS. The P/BV is 1.9-2.1 times its FY11 book value of 100. Valuations are quite expensive compared to its peer Mirc Electronics which is trading at a TTM P/E of 9 and a P/BV of 1.