2018

PIX Transmission Ltd.

The Research Bazaar

PIX Transmission Ltd., Sept. 2018

PIX Transmission Ltd – Research Report

Share Price: 195.15

Date: 04-09-2018
BSE Scrip Code: 500333
No of Shares: 1.36 crores
Market cap: 266 Crores

Company Profile
PIX Transmissions Ltd. is a leading manufacturer of Belts and related mechanical Power Transmission
products in India. It was incorporated in the year 1981. The Company features state-of-the-art Belt
manufacturing units as well as a completely automated Rubber Mixing facility in Nagpur.

PIX Transmissions Ltd. enjoys significant brand equity in the Power Transmissions industry, with strong
local as well global presence. The company has overseas subsidiary operations in Europe and Middle-East,
in addition to over 250 committed Channel Partners in over 100 countries worldwide.

Considering its global customer base, PIX has backed its products by building an impressive support
infrastructure in several key markets across the globe including UK, Germany, and UAE. Each of these
locations house a Distribution Centre and is equipped to provide technical, commercial, and logistical
support.

The key strength of PIX is its growing network of independent, committed, and loyal Channel partners in
India and over 100 countries worldwide. Relationships based on performance and trust have been the
hallmark of PIX’ strength in this regard.

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PIX Transmission Ltd., Sept. 2018

Products

Industrial Belt

Agricultral Belt

Automotive Belt

Lawn and Garden Belt

Power Ware Product

Special Apllication Belt

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PIX Transmission Ltd., Sept. 2018

Management

Name Designation Educational Age Experience Date of Gross

Qualification (Years) Joining Remuneration

Mr. Amarpal Sethi CMD I.Sc 68 47 1-Sep-1989 120.00

Mr. Sonepal Sethi Jt. MD B.Sc. Grad Pri(UK) 52 30 1-Apr-1989 114.00
Mr. Rishipal Sethi Jt. MD B.Sc. Elec. Engg. (USA) 45 22 29-Dec-2004 114.00
Mr. Sukhpal S Sethi WTD I.Sc 76 59 5-Mar-1992 114.00
Mr. Karanpal Sethi WTD B.Sc. Fin. & Acct.(USA) 32 12 1-Jun-2009 109.00
Mr. Joe Paul WTD B.Com, MIRPM 57 37 1-May-2000 74
Ms. Shirley Paul WTD M.A. (Economics) 62 40 10-Jul-2014 74

Promoter historical shareholding

Year Promoter Public (No Total (No of Promoter Public

(March (No of of Shares) Shares) % %
Ended) Shares)
2010 6,422,952 5,262,248 11,685,200 55% 45%
2011 7,108,191 5,817,009 12,925,200 55% 45%
2012 7,808,191 5,817,009 13,625,200 57% 43%
2013 7,416,067 6,209,133 13,625,200 54% 46%
2014 7,919,518 5,705,682 13,625,200 58% 42%
2015 8,248,102 5,377,098 13,625,200 61% 39%
2016 8,296,490 5,328,710 13,625,200 61% 39%
2017 8,296,505 5,328,695 13,625,200 61% 39%
2018 8,317,513 5,307,687 13,625,200 61% 39%

Business Model

Pix Transmission manufactures V-Belts and related mechanical power transmission products. Its
manufacturing facilities are located in Nagpur, Maharashtra. 50% of its revenues are from exports and
has subsidiaries in Europe and Middle East. It has channel partners in over hundred countries worldwide.
Its clients are machinery manufacturing businesses which require mechanical power transmission.
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PIX Transmission Ltd., Sept. 2018

Subsidiaries/Associates Companies

Company Name Country Subsidiary/ % of

Associates Shares
Held
PIX Transmissions Europe Ltd. U. K. Subsidiary 100
PIX Middle East Ltd. U. A. E. Subsidiary 100
PIX Germany Ltd. Germany Subsidiary 100
PIX Middle East LLC U. A. E. Subsidiary 100
PIX QCS Ltd. Ireland Associates 50

SWOT Analysis

Strengths:

• Financial Stability – It has good gross profit margins, continuous profits for the past 8 years,
reduced debt, improved interest coverage ratios, stable current and acid test ratios.
• Presence in both domestic and global markets
• Over 200 committed channel partners in over 100 countries
• Automated production technologies

Weaknesses:

• Dependence on few key managerial personnel

Opportunities:

• High growth of industries where its products are required

• India’s focus on development will have a favourable impact on the company’s products

Threats:

• High volatility of raw material prices especially rubber and black carbon
• Exchange rate risk – 50% of its revenues are from exports
• Increased rift in global trade could hamper business for the company

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PIX Transmission Ltd., Sept. 2018

Financial Snapshot

Profit & Loss Statement (Consolidated)

Narration Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Trailing
Sales 200.42 211.73 224.38 239.45 252.90 270.91
Expenses 167.17 174.84 186.24 191.72 195.24 209.79
Operating Profit 33.25 36.89 38.14 47.73 57.66 61.12
Other Income 3.68 2.62 3.20 6.00 5.36 6.01
Depreciation 13.52 12.81 13.04 13.36 14.67 14.05
EBIT 23.40 26.71 28.32 40.37 48.35 53.08
Interest 16.84 20.23 18.57 15.89 14.47 11.61
Profit before tax 6.56 6.48 9.75 24.48 33.88 41.47
Tax -0.96 2.58 3.21 8.23 11.32 11.15
Net profit 7.52 3.91 6.54 16.25 22.56 30.32

Balance Sheet (Consolidated)

Narration Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Sources of Funds
Equity Share Capital 13.62 13.62 13.62 13.62 13.62
Reserves 134.51 135.94 137.86 156.90 175.36
Borrowings 117.79 134.43 125.33 128.00 104.67
Other Liabilities 113.08 47.38 57.31 56.01 59.21
Total 379.00 331.37 334.12 354.53 352.86
Uses of Funds
Net Block 142.50 167.17 172.71 174.16 186.74
Capital Work in 6.64 - 6.21 4.67 -
Progress
Investments 14.53 12.95 13.93 22.76 11.24
Other Assets 215.33 151.25 141.27 152.94 154.88
Total 379.00 331.37 334.12 354.53 352.86

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PIX Transmission Ltd., Sept. 2018

Cash Flow Statement (Consolidated)

Narration Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Cash from Operating 45.17 31.67 63.99 27.16 31.20
Activity
Cash from Investing -60.74 -29.27 -25.78 -14.99 -13.53
Activity
Cash from Financing 2.64 -6.04 -30.42 -12.82 -24.59
Activity
Net Cash Flow -12.93 -3.64 7.79 -0.65 -6.92

Past 4 quarters performance (Standalone)

Narration Sep-17 Dec-17 Mar-18 Jun-18
Sales 54.77 67.11 79.82 69.21

Cost of material consumed 20.87 28.38 31.25 28.70

Changes in inventory -1.00 -3.18 -0.40 -3.00

Employee benefit exp 10.29 13.02 21.01 14.57
Other Expenses 11.33 14.83 9.97 13.14
Total Expenses 41.49 53.06 61.82 53.42
Operating Profit 13.28 14.05 18.00 15.79
Other Income 0.49 -0.87 3.64 2.75
Depreciation 3.39 3.44 3.51 3.71
Interest 2.91 3.30 3.01 2.39
Profit before tax 7.47 6.44 15.11 12.45
Tax 0.81 3.80 4.84 1.70
Net profit 6.66 2.64 10.27 10.75

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PIX Transmission Ltd., Sept. 2018

Growth Rates (CAGR)

7 Year 5 Year Last FY Trailing

Sales 2% 2% 6%
Profit (Total Earnings) 42% -27% 39% 34%
Profit (Excluding Other Income) 40% 38% 55% 37%
Share Price 8% 30% 2% 43%

Analysis

The company’s net profit excluding other income has increased at a 5 year CAGR of 38%. There is
negative growth in net profits during the period as there was a one-time income from other activities
during the financial year 2012-13 which increased net income for FY 2012-13 considerably. This other
income was used to reduce borrowings, thereby reducing the financial leverage and interest expenses
thereon. The gross profit margins have increased considerably in the past 2 years. This increase has led to
an increase in operating profit and net profit margins. The gross profit margins were 70.80% and 72.00%
during FY 2016-17 and 2017-18 respectively. Sales have increased considerably in the past 4 quarters with
an average growth rate of 21% Year-on-Year.

The business and operations of the firm is stable. 50% of its sales are in domestic market and 50% are in
global market. Though it has foreign currency exposure risk, its high gross profit margins could weather
the fluctuations in foreign currency. Its major risk is the high fluctuations in raw material prices, especially
volatility in rubber prices. Rubber constitutes a major proportion of input in the manufacturing of V-belts.

The increase in gross profit margins and reduction in global rubber prices suggests that the company does
not pass on the benefits of reduced input cost to the customers. In the past when the rubber prices were
high, the gross margins had reduced. This indicates that the company bears fluctuations in raw material
prices. This can create volatility in earnings of the company.

Its strong presence in both domestic and global markets is a significant advantage. The growth in
manufacturing and automotive segments in India and globally, will lead to an increased demand for
company’s products. Its advanced automated production facilities and widely distributed global channel
partners would enable the company to tap in to the growing requirements.

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PIX Transmission Ltd., Sept. 2018

Overall, the prospect of the company seems good. The company has established itself in the global
market and has created a wide reach of channel partners. Its financials are strong and has several
business advantages including advanced technology and automated production processes. Its Key
Management Personnel have many years of experience in the business. The market for company’s
products is also growing and the company is in a strong position to take advantage of this.

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PIX Transmission Ltd., Sept. 2018

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