Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EBITDA below estimates, net profit in line
Prakash Industries (PIL) reported revenues of INR 3.8 bn, down 9% Q-o-Q (up
6% Y-o-Y), primarily on account of dip in sales volume (due to production cuts)
across product segments. Revenues were higher than our estimates by 17%, as
sales volumes stood at 122 kt against our estimate of 84.8 kt. EBITDA was lower
than our estimate of INR 813 mn, at INR 717 mn, primarily due to higher raw
material cost. EBITDA declined 18.6% Y-o-Y and 21.2% Q-o-Q. Net profit, at
INR 544 mn, was marginally above expectations.
Steel expansion on hold; power expansion delayed by a quarter
Steel capacity expansion, from 0.7 mtpa to 1.0 mtpa, has been currently put on
hold due to volatile market conditions in longs and lower margins. Expansion of
the sponge iron facility, from 0.6 mt to 0.8 mt, is also delayed by a quarter to
June 2011. Incremental sponge iron capacity of 0.4 mt (total capacity of 1.2 mt)
is also put on hold/deferred. The power capacity expansion of 625 MW has been
delayed by a quarter. The first unit of 125 MW is now expected to be fully
commissioned by June 2011 (in line with our assumption).
Raising additional debt of INR 5 bn; internal accruals not sufficient
Owing to recent production cuts and delay in commissioning of iron ore mines,
PIL’s future profitability is unlikely to suffice the entire capex of INR 33 bn.
Hence, the company has proposed to fund the initial capex by debt of INR 7 bn
(total debt) against the earlier guidance of funding the expansion largely through
internal accruals. The current debt on books in INR 2.5 bn.
Outlook and valuations: Reducing estimates; maintain ‘BUY’
Considering the delay in steel, sponge iron and power capacity expansions as
well as higher iron ore costs, we are reducing our FY11 and FY12 EBITDA
estimates by 18.7% and 28.6%, to INR 3.4 bn and INR 4.9 bn, respectively.
However, we are positive on the business, considering its captive coal mine,
sponge iron and power expansion. We believe the recent sharp correction in the
stock is overdone. We maintain our ‘BUY’ recommendation on the stock. We are
introducing FY13 estimates.
Company Description
PIL is a ~30 year company based out of Delhi. It started business as a PVC pipe (15
ktpa) and B/W picture tubes manufacturer (0.3 mn units). The PVC pipe business is fully
depreciated, contributing ~INR 1.5 bn to EBITDA, while the B/W picture tube business
as been shut down.
From a PVC pipe manufacturer, the company has graduated to steel manufacturing with
facilities located in Champa and Raipur (Chhattisgarh). It manufactures steel (0.7 mtpa)
through the induction furnace route and also has allied facilities of sponge iron (0.6
mtpa), ferro alloys (0.048 mtpa), power (100 MW), and coal mining (1 mtpa capacity).
Investment Theme
PIL is expanding its current crude steel/billet capacity from 0.7 mtpa to 1 mtpa by FY11
End, which will lead to volume growth FY12 onwards. Moreover, it will also enable the
company to increase EBITDA margins as dependence on external sourcing of billets and
sponge iron would reduce. Further, the company already has a running coal mine and
has also been allocated two iron ore mines and two thermal coal. It is also setting up a
625 MW power plant, in phases of 125 MW each, the first of which is expected to be
commissioned by end of FY11 and a subsequent unit every following year.
Key Risks
Delay in ongoing expansion
Pending clearances for iron ore mines
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EBITDA below estimates, net profit in line
Prakash Industries (PIL) reported revenues of INR 3.8 bn, down 9% Q-o-Q (up
6% Y-o-Y), primarily on account of dip in sales volume (due to production cuts)
across product segments. Revenues were higher than our estimates by 17%, as
sales volumes stood at 122 kt against our estimate of 84.8 kt. EBITDA was lower
than our estimate of INR 813 mn, at INR 717 mn, primarily due to higher raw
material cost. EBITDA declined 18.6% Y-o-Y and 21.2% Q-o-Q. Net profit, at
INR 544 mn, was marginally above expectations.
Steel expansion on hold; power expansion delayed by a quarter
Steel capacity expansion, from 0.7 mtpa to 1.0 mtpa, has been currently put on
hold due to volatile market conditions in longs and lower margins. Expansion of
the sponge iron facility, from 0.6 mt to 0.8 mt, is also delayed by a quarter to
June 2011. Incremental sponge iron capacity of 0.4 mt (total capacity of 1.2 mt)
is also put on hold/deferred. The power capacity expansion of 625 MW has been
delayed by a quarter. The first unit of 125 MW is now expected to be fully
commissioned by June 2011 (in line with our assumption).
Raising additional debt of INR 5 bn; internal accruals not sufficient
Owing to recent production cuts and delay in commissioning of iron ore mines,
PIL’s future profitability is unlikely to suffice the entire capex of INR 33 bn.
Hence, the company has proposed to fund the initial capex by debt of INR 7 bn
(total debt) against the earlier guidance of funding the expansion largely through
internal accruals. The current debt on books in INR 2.5 bn.
Outlook and valuations: Reducing estimates; maintain ‘BUY’
Considering the delay in steel, sponge iron and power capacity expansions as
well as higher iron ore costs, we are reducing our FY11 and FY12 EBITDA
estimates by 18.7% and 28.6%, to INR 3.4 bn and INR 4.9 bn, respectively.
However, we are positive on the business, considering its captive coal mine,
sponge iron and power expansion. We believe the recent sharp correction in the
stock is overdone. We maintain our ‘BUY’ recommendation on the stock. We are
introducing FY13 estimates.
Company Description
PIL is a ~30 year company based out of Delhi. It started business as a PVC pipe (15
ktpa) and B/W picture tubes manufacturer (0.3 mn units). The PVC pipe business is fully
depreciated, contributing ~INR 1.5 bn to EBITDA, while the B/W picture tube business
as been shut down.
From a PVC pipe manufacturer, the company has graduated to steel manufacturing with
facilities located in Champa and Raipur (Chhattisgarh). It manufactures steel (0.7 mtpa)
through the induction furnace route and also has allied facilities of sponge iron (0.6
mtpa), ferro alloys (0.048 mtpa), power (100 MW), and coal mining (1 mtpa capacity).
Investment Theme
PIL is expanding its current crude steel/billet capacity from 0.7 mtpa to 1 mtpa by FY11
End, which will lead to volume growth FY12 onwards. Moreover, it will also enable the
company to increase EBITDA margins as dependence on external sourcing of billets and
sponge iron would reduce. Further, the company already has a running coal mine and
has also been allocated two iron ore mines and two thermal coal. It is also setting up a
625 MW power plant, in phases of 125 MW each, the first of which is expected to be
commissioned by end of FY11 and a subsequent unit every following year.
Key Risks
Delay in ongoing expansion
Pending clearances for iron ore mines
No comments:
Post a Comment