Buy Praj Industries; target of Rs 63: KRChoksey

KRChoksey is bullish on Praj Industries and has recommended buy rating on the stock with a target of Rs 63 in its January 23, 2013 research report.

“Praj Industries, Q3FY13 PAT Rs 23.2 crore (vs. est of Rs 19 crore) is above to our expectation, primarily impacted due to lower execution and increase in tax expenses on YoY basis. Praj reported revenue of Rs 187.2 crore (-14.6%, YoY) primarily led by lower execution of orderbacklog among different verticals as order inflow fell from last two quarters. EBITDA fell to Rs 21.3 crore (-12.0%, YoY) and margins improved by 33 bps due to low raw material expenses. Further, operating & manufacturing expenses increased by 314 bps on YoY basis. However, the consolidated financial has improved on YoY basis, as company reported revenue of Rs 246.2 crore (0.3%, YoY) and PAT Rs 24.2 crore (19.1%, YoY).”

“The strong order inflow of Rs 220 crore (+9.1%, YoY) led to backlog of Rs 850 crore at the end of Q3FY13. The order inflow breakup is 65% from ethanol, 7% brewery plants, 28% from customized engineering and manufacturing and water. The international orders contribute 79% from regions like South America, South East Asia and Africa. Management is confident to maintain similar order inflows in future also.”

“We revise our estimate to Rs 4.6 (from Rs 4.2) and Rs 6.3 (from Rs 5.8) for FY13E and FY14E respectively, based on execution & strong order inflow in the last quarter, however we expect improvement in margins added by Neela in FY14E . We retain our “buy” rating with revised TP of Rs 63 (from Rs 58) based on 10x FY14E EPS and led by 1.) improvement in margins led by Neela Infra for next two years 2) orderbacklog of Rs 850 crore 3) increase in ROCE on account of cash utilization for buyback and acquisition,” says KRChoksey research report.

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