Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Rationale
• Capacity enhancement improves future outlook
- Steel Capacity Enhancement
- Power Capacity Enhancement
• Internal source of raw material will help to improve
profitability
• Strong Financials y-o-y and q-o-q
Company Description
Prakash Industries Ltd. manufactures and sells steel products in
India and internationally. It involves in mining and crushing iron in
Nergaon and Metabodali mines located in Chhattisgarh, India;
and Sirkagutu mines located in Orissa, India. The company’s
products include sponge iron, steel blooms/billets/ingots, steel
structural products, wire rods, HB wire, and ferro alloys. It also
involves in the generation of energy from wind through the
operation of wind power generating farms with 6 mega watts
power generating capacity. In addition, the company generates
power using the waste hot gases, coal fines, washery rejects, and
char in the fluidized bed boilers. Further, Prakash Industries
manufactures and supplies PVC pipes for irrigation, sewerage,
and other purposes. The company was founded in 1980 and is
based in New Delhi, India.
Quoting at tempting Valuation
After huge correction, now seeing the future outlook for the
company and its performance the stock is available at
attractive levels for 12month target of Rs.119. At CMP it Is
trading at 5x and 4.6x FY11E and FY12E earnings
respectively.
Capacity enhancement improves future outlook
Steel Capacity Enhancement
The company currently has a steel capacity of 0.7 million
tonnes annually, which it plans to increase it to 1 million tonnes
as a part of expansion plan. It is currently operating at 65-70%
of its total capacity.
Power Capacity Enhancement
Company has 100 mega watt captive power plant which is
running at full capacity. The company also plans to expand its
power generation capacity at its Champa facility by 625
megawatt.with a capex of ~Rs. 25bn with phase I completion in
H1FY12. With this, PIL plans to make its way into the merchant
power business. Of the Incremental capacity, it will help in
diversification of revenue stream and provide cushion to overall
margin.
Internal source of raw material will help to improve
profitability
The company has plans to achieve full integration over the
next two years. In order to achieve this, PIL has been allotted
two iron ore mines — in Chhattisgarh and Orissa — which are
expected to be operational in the next fiscal. This will reduce
the company's dependence on third parties by nearly 100%,
and significantly improve its margins. Additionally captive
power supply will help company to integrate the business more
effectively.
Strong Financials
Y-o-Y
Net sales of Prakash Industries have been growing at a
compounded annual rate of 18% over the past 5 years. The
company average return on equity of 23-25% from last 5
years. It has been steadily generating cash flows from
operations over the past 5 years, and with a low debt equity
ratio of 0.23, it is in a comfortable position to raise funds, if
required, to finance its major expansion plans.
Company is comfortably maintaining PBIDTM margin in range
of 18-20%, and able to increase PAT margin YoY which is
currently 16% ( 2010 ) while cash profit margin shows uptrend
from last 5 years 19% ( 2010 ).
YOY company is able to increase the cash flow and sitting on
ample cash which is helpful to company to increase the
capacity without increasing debt or marginally increasing debt.
Currently company is sitting on huge cash in Balance sheet i.e.
101.78 ( 2010 ) Cr. Cash from operating activities are also
increasing from last 5 years which confirm the true profitability
of the company.
Q-o-Q
The company's performance in the Q3 11 was negatively
impacted by rising input costs (labor & Raw material) which it
could not completely pass on to its customers. As a result, its
sales grew 6% year-on year while its operating profit margin
declined 600 basis points.
Quoting at tempting Valuation
After huge correction, now seeing the future outlook for the
company and its performance the stock is available at
attractive levels for 12month target of Rs.119. At CMP it Is
trading at 5x and 4.6x FY11E and FY12E earnings
respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Rationale
• Capacity enhancement improves future outlook
- Steel Capacity Enhancement
- Power Capacity Enhancement
• Internal source of raw material will help to improve
profitability
• Strong Financials y-o-y and q-o-q
Company Description
Prakash Industries Ltd. manufactures and sells steel products in
India and internationally. It involves in mining and crushing iron in
Nergaon and Metabodali mines located in Chhattisgarh, India;
and Sirkagutu mines located in Orissa, India. The company’s
products include sponge iron, steel blooms/billets/ingots, steel
structural products, wire rods, HB wire, and ferro alloys. It also
involves in the generation of energy from wind through the
operation of wind power generating farms with 6 mega watts
power generating capacity. In addition, the company generates
power using the waste hot gases, coal fines, washery rejects, and
char in the fluidized bed boilers. Further, Prakash Industries
manufactures and supplies PVC pipes for irrigation, sewerage,
and other purposes. The company was founded in 1980 and is
based in New Delhi, India.
Quoting at tempting Valuation
After huge correction, now seeing the future outlook for the
company and its performance the stock is available at
attractive levels for 12month target of Rs.119. At CMP it Is
trading at 5x and 4.6x FY11E and FY12E earnings
respectively.
Capacity enhancement improves future outlook
Steel Capacity Enhancement
The company currently has a steel capacity of 0.7 million
tonnes annually, which it plans to increase it to 1 million tonnes
as a part of expansion plan. It is currently operating at 65-70%
of its total capacity.
Power Capacity Enhancement
Company has 100 mega watt captive power plant which is
running at full capacity. The company also plans to expand its
power generation capacity at its Champa facility by 625
megawatt.with a capex of ~Rs. 25bn with phase I completion in
H1FY12. With this, PIL plans to make its way into the merchant
power business. Of the Incremental capacity, it will help in
diversification of revenue stream and provide cushion to overall
margin.
Internal source of raw material will help to improve
profitability
The company has plans to achieve full integration over the
next two years. In order to achieve this, PIL has been allotted
two iron ore mines — in Chhattisgarh and Orissa — which are
expected to be operational in the next fiscal. This will reduce
the company's dependence on third parties by nearly 100%,
and significantly improve its margins. Additionally captive
power supply will help company to integrate the business more
effectively.
Strong Financials
Y-o-Y
Net sales of Prakash Industries have been growing at a
compounded annual rate of 18% over the past 5 years. The
company average return on equity of 23-25% from last 5
years. It has been steadily generating cash flows from
operations over the past 5 years, and with a low debt equity
ratio of 0.23, it is in a comfortable position to raise funds, if
required, to finance its major expansion plans.
Company is comfortably maintaining PBIDTM margin in range
of 18-20%, and able to increase PAT margin YoY which is
currently 16% ( 2010 ) while cash profit margin shows uptrend
from last 5 years 19% ( 2010 ).
YOY company is able to increase the cash flow and sitting on
ample cash which is helpful to company to increase the
capacity without increasing debt or marginally increasing debt.
Currently company is sitting on huge cash in Balance sheet i.e.
101.78 ( 2010 ) Cr. Cash from operating activities are also
increasing from last 5 years which confirm the true profitability
of the company.
Q-o-Q
The company's performance in the Q3 11 was negatively
impacted by rising input costs (labor & Raw material) which it
could not completely pass on to its customers. As a result, its
sales grew 6% year-on year while its operating profit margin
declined 600 basis points.
Quoting at tempting Valuation
After huge correction, now seeing the future outlook for the
company and its performance the stock is available at
attractive levels for 12month target of Rs.119. At CMP it Is
trading at 5x and 4.6x FY11E and FY12E earnings
respectively.
No comments:
Post a Comment