Buy Praj Industries; target of Rs 92: KRChoksey

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Buy Praj Industries; target of Rs 92: KRChoksey

KRChoksey is bullish on Praj Industries and has recommended buy rating on the stock with a target of Rs 92 in its January 25, 2012 research report.

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KRChoksey is bullish on Praj Industries and has recommended buy rating on the stock with a target of Rs 92 in its January 25, 2012 research report.

"PRAJ reported Q3FY12 standalone revenues of 219.3 crore (up 47.9%, YoY) that is above to our estimates, primarily led by higher execution in alcohol/ethanol segment. Excluding Forex losses, EBITDA up by Rs 24.2 crore (up 151.5%, YoY), primarily led by lower O&M expenses. EBITDAM has improved by 455 bps and O&M Expenses fell by 295 bps and employ cost fell by 228 bps. PAT grew by Rs 21.5 crore (up 57.4%, YoY) and forex losses has fallen from -5.3 crore to -3.6 crore in Q3FY12."

"Alcohol/Ethanol vertical contributed majority of revenue (73%) and order inflow (58%) at the end of Q3FY12. We expect revenue CAGR of 16% over the period of FY11-FY13E on account of substantial order backlog in this segment. Management indicated that geographies like US, Europe & Brazil are silent in current period and growth will be contributed regions like South & Central America, SE Asia and Africa. Customized engineering vertical has commenced 3,000 tons facility in Kandla and this facility will generate revenue of Rs 70-100 crore over the period of FY13E to FY15E. Further, Jejuri Plant, GMP compliant manufacturing facility, for range of biotech products also operationalised and expected to generate revenue of Rs 60-70 crore over the period FY13E to FY15E. PRAJ, in Q3FY12, received an order inflow of Rs 220 crore (58%, international orders) inspite of challenging global environment that builds more confidence in the business. The order backlog is Rs 900 crore (1.2x to FY12 Sales), 84% from ethanol/alcohol plants."

"We retain our recommendation "Buy" on Praj Industries Ltd with a target price of Rs 92 per share based on P/E multiple of 15.0x to FY13E EPS of Rs 6.1. We are positive on Praj on account of 1.) Improvement in margins 2.) Moderate order inflow 3.) Increase in ROCE on account of cash utiliasation for buyback and acquisition. However, we have not valued Neela System due to non availability of Neela's financial," says KRChoksey research report.   

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To read the full report click on the attachment