Palram Industries (1990) Ltd, together with its subsidiaries, manufactures and sells semi-finished extruded thermoplastic sheets, architectural panel systems, and finished products in Israel and internationally. The company offers PVC, polycarbonate and acrylic sheets, and panel systems. Its products are used in DIY, construction, architectural project, advertising, agriculture, safety and security, and fabrication markets. The company was founded in 1963 and is based in Zevulun, Israel. Palram Industries (1990) Ltd is a subsidiary of Ramat Yohanan Industries & Agriculture Development-Agricultural Coperative Society.

Israel

Palram Industries (1990) Ltd

Industrials

The company pays dividends most of the time. It has paid dividends in almost every one of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends annually. 

PLRM.TA reported revenue of ILS 1 868mn in the last 12 months, up 9% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 41% from FY23 to ILS 9.01.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 23ppts over past six months and grown 12ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 19.5% in the last 12 months, up from 15.4% in FY23. 

Historically, PLRM.TA has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 12.4%, a growth from 9.6% in FY23. 

Palram Industries (1990) Ltd reported a return on equity (RoE) of 19.3% in the last 12 months, up from 15.5% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 12.6% in the last 12 months, an increase from 9.9% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 15.1%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 3.4 in the past several years. This ratio implies a excellent shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

PLRM.TA has very poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day under normal market conditions. Liquidity is very unstable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, and poor working capital management.

In highly turbulent market conditions, PLRM.TA is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, PLRM.TA is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to notable. 

Based on key historical and expected multiples, the stock is greatly undervalued relative to its peers. Specifically, the stock is 'cheap' on P/E, undervalued on EV/EBITDA, underpriced on P/FCF. 

Palram Industries (1990) Ltd

ILA 7656

4

Palram Industries (1990) Ltd

ILA 7656

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

ILA 7656

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