1:5 Stock Split: Defence Stock Falls 35% After First Ever Split In 3 Months; Is It Undervalued?

Defence company, Premier Explosives has recorded significant correction since its first-ever split-up in the ratio of 1:5 in June month. Currently, the stock is at Rs 575 apiece on NSE, with a market cap of Rs 3,091.27 crore. Does that make Premier Explosives an undervalued stock? What are its fundamentals?

Premier Explosives Share Price:

The stock price ended at Rs 575 apiece, which was down marginally by 0.3% after market hours on August 22, with a market cap of Rs 3,091.27 crore.

The stock first time split on June 21, 2024, in the ratio of 1:5. This meant that 1 equity share of Premier Explosives at a face value of Rs 10 each was split into five smaller shares with a face value of Rs 2 each.

On the ex-split date aka June 21, the stock ended at Rs 885 apiece on NSE. While on the ex-split date, the company had also touched a new 52-week high of Rs 908.80 apiece.

From the closing price on June 21 to date, Premier Explosives is down by 35.02%.

Is Premier Explosives Undervalued?

As per Angel One data, conventionally, a PB ratio of below 1.0, is considered indicative of an undervalued stock. Some value investors and financial analysts also consider any value under 3.0 as a good PB ratio. However, the standard for "good PB value" varies across industries.

Currently, Premier Explosives' price-to-book ratio is at 14x, which indicates that the stock is overvalued. However, the stock has managed to beat Nifty by triple-digit percentage, and yet underperformed its sector. Nonetheless, the price-to-equity ratio is very high in Premier Explosives, while the return on equity is stable.

Premier Explosives Share Fundamentals:

As per Trendlyne data, here are the key fundamentals of Premier Explosives stock:

- Annual Revenue rose 35.1%, in the last year to ₹275.87 Cr. Its sector's average revenue growth for the last fiscal year was 10.46%.

- Annual Net Profit rose 310.53% in the last year to ₹28.36 Cr. Its sector's average net profit growth for the last fiscal year was 24.67%.

- Quarterly Revenue rose 33.75% YoY to ₹84.03 Cr. Its sector's average revenue growth YoY for the quarter was 8.75%.

- Stock Price rose 145.6% and underperformed its sector by 5.34% in the past year.

- Debt to Equity Ratio of 0.28 is less than 1 and healthy. This implies that its assets are financed mainly through equity.

- Mutual Fund Holding decreased by 0.4% in the last quarter to 8.89.

- Interest Coverage Ratio is 5.96, higher than 1.5. This means that it is able to meet its interest payments comfortably with its earnings (EBIT).

- Promoter Share Holding stayed the same in the most recent quarter at 41.33%.

- Promoter Pledges are zero.

- Return on Equity(ROE) for the last financial year was 12.87%, in the normal range of 10% to 20%.

- Price to Earning Ratio is 112.38, higher than its sector PE ratio of 68.91.

Meanwhile, as per Axis Securities, in the last 1 year Premier Explosives Ltd, has beaten the Nifty 50 by 117.93% (CAGR difference). In the last 1 year, the company has Higher than the Nifty 50 volatility by 2.91%. Also, for 7 out of the Last 12 Months, i.e. 58% of the time it has beaten Index returns.