I'm not KIK but I'm going to throw in my 2 cents on current state of PSIX. Yesterday's report was gangbusters to say the least. Most important was the continuing rise in gross margins indicating the ramp of the new Beloit facility is going smoothly. Now take a look at the gross margin trend over last 5 quarters: Q2,'23 was 22.1%, Q3-24.1, Q4 26.3, Q1'24-27, Q2-31.8. This as sales mix has shifted from transportation and industrial mostly to oilfield, demand response and enclosures. The current sales mix favors far less warranty expenses which is one aid to the increase in GM. Frankly if they got out of the transportation market, I think that would be to their benefit as it never really was that good of a business. I would say that GM is getting near the top and won't go any higher than 35% however, but what do I know?
Now they still maintain 3% sales growth for the year. So last years sales were $459 million, they've done $206 so far, leaves us with 266 for the next 2 quarters. I assume a ramp up of sales and GM with gross margings in Q3 and 4 of 32 and 33%. R&D holds the same to slight increase and SG&A goes back to 8% of sales. I come up with EPS for Q3 of $.92, Q4 $1.08. Total for the year without the lawsuit benefit is $3.04 and I believe I'm being conservative with the numbers. Any one point deviation in GM means a change in EPS of +/- $.01 over the 6 months.
Now most important, from the press release is this:
"We have successfully secured and are in the process of finalizing several major multi-year sales agreements with key customers for Data Center applications. These strategic partnerships are poised to drive future growth in this segment now and in the future. Our focus remains on leveraging these opportunities to drive further profitable growth and deliver sustained value to our shareholders.”
So higher margin business, sales growth next year.
Ok bad stuff:
Didn't generate much cash from operations since they put a lot of money into inventory and prepaid expenses, only paid down $5 million in debt. Press release says they're looking for ways to optimize their debt structure. I kind of doubt they are looking at an equity raise as that would dilute Weichai's majority ownership. Why Weichai wants to keep them in a stranglehold on their debt agreements has me scratching my head though. SOFR should be coming down in the next 2 quarters though so that will help out on interest costs. Gary "sour grapes" Winemaster will continue to sell off shares increasing the float. So far he's sold off 88,000 shares, he has 3.2 million left. He's got lawyer fees to pay, maybe wants to diversify, who knows maybe he'll want to start a new company that competes with PSIX? His brother Ken also owns 2.2 million shares maybe we'll see him start selling his also.
Bottom line you're looking at a company that trades for less than 4X this years earnings and will grow next year. I would call that a screaming buy.
AI
