Scripscan:Prakash Industries Ltd
cmp:26
Code:506022
Story:For 2QFY2012, PIL`s net sales grew by 8.8% y-o-y to Rs 4.58 billion mainly on account of higher realization across product categories, partially offset by the decline in sales volumes. Gross realization of basic steel and wire rods increased by 26.1% y-o-y each. Basic steel sales volumes increased by 55.1% y-o-y to 27,923 tons, while wire rod sales volumes decreased by 28.9% y-o-y to 78,969 tons in 2QFY2012.Raw-material costs increased by 21.8% y-o-y to Rs 3.06 billion on the back of increased input costs mainly iron ore. Consequently, EBITDA margin slipped by 483bp y-o-y to 16.8% and EBITDA decreased by 15.5% y-o-y to Rs 770 million. Interest expenses grew by 573.0% y-o-y to Rs 20 million. Hence, net profit decreased by 22.7% y-o-y to Rs 550 million in 2QFY2012.PIL has delayed the commissioning of the first 125MW unit (5x25MW) to 4QFY2012 (earlier December 2011). On account of slow-moving regulatory hurdles, the company`s Fatehpur coal mine could take longer time than the company`s anticipation.While PIL has slowed down its power expansion plans, I expect PIL`s EBITDA to witness strong growth once the benefits of increased capacities of sponge iron and power commence production. PIL is currently trading at inexpensive valuations of 3.0x and 2.6x FY2012E and FY2013E EV/EBITDA, respectively. On P/B basis, it is trading at 0.3x each on FY2012E and FY2013E, respectively.Buy it with a 18 months target of 50rs.
