Hold Praj Industries; target of Rs 50: ICICIdirect.com

ICICIdirect.com has recommended hold rating on Praj Industries with a target Rs 50 in its October 23, 2012 research report. The research firm believes that until the company accelerates its execution in domestic business and grabs some significant overseas orders, revenue and margin growth would remain subdued.

“Praj Industries, during the quarter Praj’s order book improved marginally to Rs820 crores from |800 crores in Q1FY13. Out of the Rs820 crores book, ~53% orders are from domestic sector and ~47% from international sector and ~75% orders are constituted by ethanol business. Fresh inflow of orders during the quarter was Rs220 crores. According to the management, there are a few projects in the non-ethanol space where the inquiry pipeline with investment cycle is seeing revival; however the rate of growth is quiet slow. Hence, in spite of a growing order book we remain cautious unless the execution by company improves.”

“Revenues during the quarter constituted ~42% from domestic markets and ~82% was comprised by ethanol plant business. Praj has been facing some head winds in operations and margins in the domestic markets and is therefore looking at expanding its presence largely in the international markets. We believe that until the company accelerates its execution in domestic business and grabs some significant overseas orders, revenue and margin growth would remain subdued.”

“Led by the slower than expected revenue growth and continued margin pressure, we are revising our estimate for FY14E EPS to Rs 4.2/share, revising our TP to Rs 50/share with a hold rating,” says ICICIdirect.com research report.

Institutional holding more than 40% in Indian cos

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