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Praj Industries Q1FY15 results update

August 6, 2014, Wednesday, 10:15 GMT | 05:15 EST | 13:45 IST | 16:15 SGT
Contributed by Nirmal Bang

PIL’s consolidated revenue reported growth of 28% YoY to Rs 221.27 cr during Q1FY15. EBITDA stood at Rs 11.7 cr against Rs 0.52 cr in Q1FY14. However, despite the strong performance at the operating level, PAT came down 19.4% YoY and stood lower at Rs 2.49 cr vs. Rs 3.1 cr in Q1FY14 on account of lower other income and higher share of minority interest and tax expenses. The major disappointment was because of new order booking, which was lowest in last many quarters. Export sales contributed 58% to total revenues in Q1FY15. While Ethanol and Brewery business contributed 52% and 13% to cons revenues respectively, the Emerging Business saw a larger share at 35%, which is in line with management’s expectations to achieve 50% of the total revenue contribution by FY17.

- Over the past 5 quarters, PIL has consistently disappointed on the order book front as consolidated order backlog on 30th June 2014 stood at Rs 730 cr, significantly down by 28% yoy. Order inflow for the quarter was a paltry Rs 134 cr compared to Rs 250 crore in Q1FY14. Management has attributed this consistent drop in order book growth on delay’s witnessed in international orders and expects its continued push on brewery and EM business to provide cushion in the quarters ahead.

- PIL has successfully commissioned a bioethanol plant in Sierra Leone for Rs 124 cr. This plant would serve its markets in the EU and company expects the increase is ethanol blending mandate in EU from current E5.75 to E7 would create incremental opportunities going forward.

- PIL’s water & wastewater SBU commissioned two plants in India – ETP for epoxy plat and ZLD for the largest textile manufacturing unit in India. The management envisages opportunities arising out of stringent regulatory overhang on the chemical and pharma sector to drive the next leg of growth for this SBU.

- Work on setting up a 2nd generation demo plant in Maharashtra is on track and is expected to be break ground by Q3FY15. The Company has successfully completed its discussion with a client in central India to set up a unique bolt-on, 2nd generation ethanol plant which will be set up at a cost of Rs 80 cr.

Valuation & Recommendation

Going forward, we express concern on order inflow momentum of Praj, though we remain upbeat on the aggressive efforts for its new emerging business, which has seen significant improvement on both revenue and order book front. Developments in international markets would be closely watched as it could provide some much needed clarity on order inflows. Timely and successful commercialization of the 2nd generation ethanol plant would be a big trigger for the stock. At the CMP, the stock trades at 11.4x and 1.5x its FY16E PE and P/BV respectively. We revise our target price to Rs 68/share with a HOLD rating on the stock (i.e. 13x FY16E EPS).