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Praj Industries Q4FY14 results update

June 2, 2014, Monday, 16:52 GMT | 11:52 EST | 20:22 IST | 22:52 SGT
Contributed by Nirmal Bang


PIL’s consolidated revenue reported growth of 31.3% YoY to Rs 349.4 cr during the quarter. Despite strong revenue growth the company reported EBITDA of Rs 33.4 cr against Rs 29.5 cr in Q4FY13, on account of forex loss and higher raw material cost in this quarter. PAT stood at Rs 20.6 cr, up by 22.9% YoY. Export sales contributed 56% to total revenues in Q4FY14. Ethanol, Brewery and Emerging Business contributed 65%, 9% and 26% respectively. The company further expects emerging business will contribute close to 50% of the total revenues in FY17.

- Consolidated order backlog at the end of FY14 stood at Rs 820 cr, down by 9% yoy while order inflow for the quarter declined by 4% to Rs 300 cr. Exports constituted 20% of the order book while Ethanol Brewery and Emerging Business constituted 60%, 20% and 20% respectively. The execution period for ethanol and brewery business is 12-18 months and for emerging business is 6-7 months.

- Despite challenging business environment in FY14, Praj witnessed order intake of Rs 9.3bn against Rs 9.5bn in FY13 primarily driven by the domestic market.

- The company is planning to set-up its 2nd generation demo plant in Maharashtra. It has also signed a letter of intent with a European company for setting up the 2nd generation plant in European region and would be funded by European partner. The Company is also engaged in discussion with a client in central India to set up a unique bolt-on, 2nd generation ethanol plant which will be first of its kind in Asia. Praj will set up any one of this which will be most feasible.

- The company has declared interim dividend of Rs 0.6/share and final dividend of 1.62/share in FY14.

- The company has the strength of 120 people in R&D. It has appointed international advisors for coming up with new strategies.


Valuation & Recommendation

Going forward, we expect order inflow momentum of Praj to pick up on the back of aggressive efforts for its new emerging business, increase in domestic order inflow with expectation of more ethanol blending and improvement in international market. This will also aid margins and ROE to expand in FY15 and FY16. Successful commercialization of the 2nd generation ethanol plant would be a big trigger for the stock. At the CMP, the stock trades at 14.8x and 11.3x its FY15E PE and P/BV respectively. We roll over our valuation base to FY16E and upgrade our target price to Rs 81/share with HOLD rating on the stock (i.e. 13x FY16E EPS).