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Praj Industries- Impressive order book growth…
Praj Industries’ Q3FY11 result were in line with our estimates as the
topline witnessed flat growth at | 148.2 crore compared to | 147.4 crore
in Q3FY11. However, it grew ~37% over Q2FY11. The company received
fresh orders worth | 250 crore (60% international orders and 40%
domestic) in the quarter. EBITDA margins remain low at 7.6% similar to
6.2% in Q2FY11 but declined from 22.4% in Q3FY10. The raw material to
sales ratio increased from 58.6% in Q3FY10 and 58.8% in Q2FY11 to
62.9% in Q3FY11 as 95% of the revenue contribution was from products
and only 5% was from engineering (servicing part). Net profit stood at |
13.6 crore, declining from | 29.2 crore in Q3FY10 but witnessed an
improvement from | 8.9 crore in Q2FY11.
Order book starts growing
The company’s order book at the end of the quarter stands at | 700 crore
(~55% domestic and 45% international) led by an order inflow of | 250
crore. These orders are executable in an average 12 month period. Total
90% of the order book contains ethanol based orders and 10% brewery
based ethanol equipment. Also, 65% of the order book is from sugar
based feedstock and 35% from starch based feedstock. Praj received two
large orders his quarter (one from Argentine and another from Europe).
Valuation
At the current price of | 82, the stock is trading at 30.7x its FY11E EPS of |
2.7 and 19.4x its FY12E EPS of | 4.2. The global economic recovery and
rising crude prices resulted in | 250 crore incremental growth in the order
book. We believe the partnership with Qteros for commercialisation of
cellulosic ethanol would only produce results by the end of 2012. However,
we believe margins would improve as order inflows from international
subsidiaries are increasing at a faster pace. Hence, we upgrade our target
on the stock from |63 to | 84 and assign an ADD rating.
Strategic partnership with Qteros
Praj Industries has entered into a strategic partnership with Qteros to
increase its commercialisation efforts for industrial-scale cellulosic ethanol
production. The agreement leverages both Qteros’ broadly patent protected
and highly flexible consolidated bio processing platform (CBP) with Praj’s
research capabilities and its expertise to deliver fully integrated engineering
design packages for lowest cost production of ethanol from a broad variety
of non-food based feedstock. We believe the company would be unable to
commercialise the production of non-food based feedstock ethanol before
end of FY12. However, it would be able to increase the government’s effort
to increase ethanol consumption as concerns regarding food security abate.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Praj Industries- Impressive order book growth…
Praj Industries’ Q3FY11 result were in line with our estimates as the
topline witnessed flat growth at | 148.2 crore compared to | 147.4 crore
in Q3FY11. However, it grew ~37% over Q2FY11. The company received
fresh orders worth | 250 crore (60% international orders and 40%
domestic) in the quarter. EBITDA margins remain low at 7.6% similar to
6.2% in Q2FY11 but declined from 22.4% in Q3FY10. The raw material to
sales ratio increased from 58.6% in Q3FY10 and 58.8% in Q2FY11 to
62.9% in Q3FY11 as 95% of the revenue contribution was from products
and only 5% was from engineering (servicing part). Net profit stood at |
13.6 crore, declining from | 29.2 crore in Q3FY10 but witnessed an
improvement from | 8.9 crore in Q2FY11.
Order book starts growing
The company’s order book at the end of the quarter stands at | 700 crore
(~55% domestic and 45% international) led by an order inflow of | 250
crore. These orders are executable in an average 12 month period. Total
90% of the order book contains ethanol based orders and 10% brewery
based ethanol equipment. Also, 65% of the order book is from sugar
based feedstock and 35% from starch based feedstock. Praj received two
large orders his quarter (one from Argentine and another from Europe).
Valuation
At the current price of | 82, the stock is trading at 30.7x its FY11E EPS of |
2.7 and 19.4x its FY12E EPS of | 4.2. The global economic recovery and
rising crude prices resulted in | 250 crore incremental growth in the order
book. We believe the partnership with Qteros for commercialisation of
cellulosic ethanol would only produce results by the end of 2012. However,
we believe margins would improve as order inflows from international
subsidiaries are increasing at a faster pace. Hence, we upgrade our target
on the stock from |63 to | 84 and assign an ADD rating.
Strategic partnership with Qteros
Praj Industries has entered into a strategic partnership with Qteros to
increase its commercialisation efforts for industrial-scale cellulosic ethanol
production. The agreement leverages both Qteros’ broadly patent protected
and highly flexible consolidated bio processing platform (CBP) with Praj’s
research capabilities and its expertise to deliver fully integrated engineering
design packages for lowest cost production of ethanol from a broad variety
of non-food based feedstock. We believe the company would be unable to
commercialise the production of non-food based feedstock ethanol before
end of FY12. However, it would be able to increase the government’s effort
to increase ethanol consumption as concerns regarding food security abate.
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