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Pratibha Industries Limited (PIL)
Investment Rationale
Strong foothold in the water segment business: Pratibha Industries Limited (PIL) has
emerged as one of the leading players in the water segment space with over 30 years experience
in manufacturing of pipes, construction of complex water supply treatment, surface
transport, urban infrastructure as well as BOT Projects. We expect PIL to benefit from its
strong order book and good execution track record.
Robust Order book: PIL’s order book stands currently at ~R 36bn (3600crs) diversified
across segments like water treatment (60%) & urban infrastructure (40%) with an average
execution period of 3-3.5 yrs. PIL also has an L1 bidder position (lowest bidder) of ~7bn
which the management expects to convert into orders by the end of Q4 FY11. PIL management
expects to close the financial year with an order book of R 50bn (5000crs). PIL current
order book to sales is 3.5x FY10 revenue.
Backward Integration should help to sustain margins: PIL expanded its manufacturing
capacity of HSAW pipes from 92,000 TPA (tonnes per annum) to 180,000 TPA. With
HSAW pipes being a key input for infra based projects like water segment and oil & gas
pipelines, the backward integration initiatives should help the company to sustain its margins
(EBITDA margin of around 14%) despite high commodity cost environment.
PAN India Presence: PIL started its operations from Maharashtra as a focused player and
gradually diversified across India through entry into new verticals & aggressively bidding for
new projects. Out of the total order book, 58% of the orders accrue from Bihar, Karnataka,
MP, UP, New Delhi & Rajasthan while rest 42% is from Maharashtra. Going forward company
plans to expand its presence across geographies & maintain its order book inflow.
Focus towards development of urban infra & real estate: PIL has made a foray into
a new segment - construction of buildings & structural modernization of Airports. Recently
company won 2 prestigious Airport projects i.e. Ahmedabad Airport and Amritsar Airport
from the Airport Authority of India. PIL has also commenced construction of various shopping
malls in the suburbs of Mumbai.
Outlook & Valuations: We expect net revenue to grow at a CAGR of 24% over FY11-
13E. The growth prospects for PIL is expected to remain robust inline with strong order backlog
led by growth in its core water supply management segment. PIL has entered into new
verticals such as hydro carbon, power projects and real estate which should support revenue
growth going forward. PIL is also collaborating with international players to grow its order
book. At current price of I54, stock is trading at FY12E PE of 6.0x and EV/EBITDA of 4.9x
We recommend a BUY on the stock with target price of `72 per share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pratibha Industries Limited (PIL)
Investment Rationale
Strong foothold in the water segment business: Pratibha Industries Limited (PIL) has
emerged as one of the leading players in the water segment space with over 30 years experience
in manufacturing of pipes, construction of complex water supply treatment, surface
transport, urban infrastructure as well as BOT Projects. We expect PIL to benefit from its
strong order book and good execution track record.
Robust Order book: PIL’s order book stands currently at ~R 36bn (3600crs) diversified
across segments like water treatment (60%) & urban infrastructure (40%) with an average
execution period of 3-3.5 yrs. PIL also has an L1 bidder position (lowest bidder) of ~7bn
which the management expects to convert into orders by the end of Q4 FY11. PIL management
expects to close the financial year with an order book of R 50bn (5000crs). PIL current
order book to sales is 3.5x FY10 revenue.
Backward Integration should help to sustain margins: PIL expanded its manufacturing
capacity of HSAW pipes from 92,000 TPA (tonnes per annum) to 180,000 TPA. With
HSAW pipes being a key input for infra based projects like water segment and oil & gas
pipelines, the backward integration initiatives should help the company to sustain its margins
PAN India Presence: PIL started its operations from Maharashtra as a focused player and
gradually diversified across India through entry into new verticals & aggressively bidding for
new projects. Out of the total order book, 58% of the orders accrue from Bihar, Karnataka,
MP, UP, New Delhi & Rajasthan while rest 42% is from Maharashtra. Going forward company
plans to expand its presence across geographies & maintain its order book inflow.
Focus towards development of urban infra & real estate: PIL has made a foray into
a new segment - construction of buildings & structural modernization of Airports. Recently
company won 2 prestigious Airport projects i.e. Ahmedabad Airport and Amritsar Airport
from the Airport Authority of India. PIL has also commenced construction of various shopping
malls in the suburbs of Mumbai.
Outlook & Valuations: We expect net revenue to grow at a CAGR of 24% over FY11-
13E. The growth prospects for PIL is expected to remain robust inline with strong order backlog
led by growth in its core water supply management segment. PIL has entered into new
verticals such as hydro carbon, power projects and real estate which should support revenue
growth going forward. PIL is also collaborating with international players to grow its order
book. At current price of I54, stock is trading at FY12E PE of 6.0x and EV/EBITDA of 4.9x
We recommend a BUY on the stock with target price of `72 per share.
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