Please refer to important disclosures at the end of this report 1 Quarterly Highlights (Standalone) Particulars ( ` cr) 4QFY13 4QFY12 yoy (%) 3QFY13 qoq (%) Net sales 602 630 (4.3) 605 (0.5) EBITDA80 107 (25.0) 65 24.0 EBITDA margin (%) 13.3 17.0 (368)bp 10.7 263bp Net profit 39 76 (48.9) 21 82.2 Source: C ompany, Angel Research Prakash Industries (PIL) reported a 48.9% yoy decline in profitability however given cheap valuations we recommend a Buy rating on the stock. Lower realizations dents top line: For 4QFY2013, PIL’s net sales declined by4.3% yoy to `602cr mainlyon account of lower realizations partially offset byhigher volumes. Sales volumes of structur al steel/TMT and wire rods increased by72.2% and 11.9% yoy to 55,749 tonne and 90,580/tonne, respectively. However, average realizations of structural steel and basic steel segment declined by 8.1% and 6.3% yoy respectiv ely. High costs dent PIL’s profitability : Raw material costs as a percentage to sales increased to 66.2% compared to 65.4% in 4QFY2013. The EBITDA margin slipped by 368bp yoy to 13.3% and EBITDA decreased by 25.0% yoy to `80cr. Hence higher interest and depreciation costs led to the company posting a decline of 48.9% yoy to `39cr in 4QFY2013. Outlook and valuation: PIL has slowed down its power expansion plans; nevertheless, we expect PIL’s EBITDA to witness a modest growth beginning FY2015 once the benefits of increased capacities of sponge iron and power commence meaningful production. Moreover, PIL is currently trading at inexpensive valuations of 3.6x and 3.3x FY2014E and FY2015E EV/EBITDA, respectively. On P/BV basis, it is trading at 0.2x a nd 0.2x FY2014E and FY2015E, respectively. Hence, we recommend a Buy rating on the stock with a target price of `45, valuing the stock at 3.5x FY2015E EV/EBITDA. Key financials (Standalone) Y/E March ( ` cr) FY2012 FY2013E FY2014E FY2015E Net sales 2,107 2,511 2,615 2,776 % chg 26.6 19.2 4.1 6.2 Adj. net profit 268 165 143 152 % chg 0.4 (38.5) (13.1) 6.0 EPS ( ` ) 18.4 11.3 9.8 10.4 EBITDA margin (%) 17.4 13.0 12.1 12.0 P/E (x) 2.0 3.2 3.7 3.5 P/BV (x) 0.2 0.2 0.2 0.2 RoE (%) 14.6 8.1 6.5 6.5 RoCE (%) 10.7 7.2 6.4 6.5 EV/Sales (x) 0.6 0.5 0.4 0.4 EV/EBITDA (x) 3.6 3.6 3.6 3.3 Source: C ompany, Angel Researc h BUY CMP `36 Target Price `45 Investment Period 12 months Stock Info Sector Bloomberg Code PKI@IN Shareholding Pattern (%) Promoters 46.5 MF / Banks / Indian Fls 3.8 FII / NRIs / OCBs 2.6 Indian Public / Others 47.2 Abs. (%) 3m 1yr 3yr Sensex 1.8 23.4 19.6 Prakash Ind. ( 6.8) ( 20.4) ( 78.7) 10 19,674 5,967 PRKI.BO 482 1.1 64/32 92,542 782 Steel Avg. Daily Volu me Market Cap ( `cr) Beta 52 Week High / Low Net Debt ( `cr) Face Value ( `) BSE Sensex NiftyReuters Code Bhavesh Chauhan Tel: 022- 3935 7800 Ext: 6 821 [email protected]Vinay Rachh Tel: 022- 39357600 Ext: 6841 [email protected]Prakash Industries Performance highlights 4QFY2013 Result Update | Steel May 23, 2013
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For 4QFY2013, PIL’s net sales declined by 4.3% yoy to ` 602cr mainly onaccount of lower realizations partially offset by higher volumes. Sales volumes of
structural steel/TMT and wire rods increased by 72.2% and 11.9% yoy to 55,749
tonne and 90,580/tonne, respectively. The average realizations of structural steel
and basic steel segment declined by 8.1% and 6.3% yoy respectively.
Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement Prakash Industries
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
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Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)