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Watchlist #3- Paramount Communications

  • Jan 3
  • 3 min read
With Watchlist we pen down our broader thoughts on an idea that looks interesting and is worth keeping in one’s watchlist. This week’s idea is Paramount Communications.

Paramount Communications is into cables & wires business with power cables in the domestic market and exports to US being majority of its business.


Why Paramount looks interesting?

  • Big Turnaround over last 5 years

  • Near term challenges due to tariffs

  • Valuations & Recent Promoter Buying



The Big Turnaround

As a company, Paramount has seen a major turnaround over last 5-7 years wherein it has come out of corporate debt restructuring. Initial turnaround was gradual but has accelerated over last few years on the back of a favorable demand environment for power & railway cables (which has been the mainstay for the company) and surge in exports business.


Paramount has been the fastest growing wires & cables company in recent years growing at ~40% CAGR in revenues which along with improving margins has resulted in material change in company’s profits.


Readers can access our full research report on Paramount to understand the turnaround in detail here-


We had initiated on Paramount in Aug’24 to bet on this turnaround; luckily, we exited at breakeven in Jan’25 to invest in something better and thus avoided the tariff led challenges and price correction.


Near Term Challenges due to Tariffs

Exports to US have been ~30% of company’s revenues and were a major growth & profitability driver.


However, the sharp growth & turnaround in business has come to a sudden but temporary halt in last 3 quarters due to high tariffs imposed by US on Indian Imports. Paramount’s US business is done on duty delivered basis wherein it takes of delivery & duty till goods reach the buyers in the US.


As a result, the company despite continuing to grow revenues at rapid pace has seen sharp reduction in profitability in last 3-quarters;


Valuations & Recent Promoter Buying

Because of tariff led impact on profitability, there has been a sharp correction in stock’s price from ~Rs90 levels to ~Rs30-40 levels now.


The stock is currently trading at a market cap of ~Rs1200 crores and pre-tariff was doing ~Rs20 crores of quarterly PAT; so, the stock is broadly trading at ~15x normalize profits without considering the growth in revenues over last few quarters.


So, a very attractive valuation for a company with such strong headline growth.


Also, promoter has started buying from the market in smaller quantities in last week or so.


Issues/Risks to Consider

The risk/challenge here continues to be the uncertainty around trade deal with the US; without a resolution on that front, growth & profitability will take time to recover.


In summary, Paramount offers an opportunity wherein we have a company growing at strong pace on the back of major turnaround, that is facing some near-term challenges and that has resulted in stock coming down to very attractive valuations.

That’s all for this one; we’ll be back with a new idea next week. Meanwhile readers can access some of our more detailed research and resources here;



Disclosures:
Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.

“Registration granted by SEBI, Enlistment with RAASB and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”

“Investments in securities market are subject to market risks. Read all the related documents carefully before investing.”

“The securities quoted are for illustration only and are not recommendatory”

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