ICICI Securities Limited Praj Industries (PRAIN)

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ICICI Securities Limited Improving sales on the back of increasing order book position over the quarters is expected to maintain the sales growth for the company. With fresh orders of | 250 crore flowing in during the quarter, the company’s current order book stands at | 750 crore Exhibit 3: Order book break-up by geography 40% ICICIdirect.com | Equity Research | 750 cr Order Book International Domestic Source: Company, ICICIdirect.com, Research 60% Exhibit 2: Sales & order book position (| crore) 850 800 750 700 650 600 550 500 126.4 200.7 147.4 127.8 93. 7 108.2 148.2 202.9 800 800 800 700 700 600 700 750 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Source: Company, ICICIdirect.com Research Closing Order Book (LHS) Sales (RHS) Exhibit 4: Order book break-up by segment 13% | 750 cr Order Book 87% Alcohol Water & Waste water Source: Company, ICICIdirect.com, Research The company’s order book has increased by ~| 50 crore during the quarter over Q3FY11, with orders worth | 250 crore flowing in and ~| 200 crore backlog orders being executed. The composition of the order book has been shifted towards international orders contributing 60% in Q4FY11 against ~55% in Q3FY11. Also, looking at the segment wise contribution, the percentage of orders from water, waste water and beer has increased to 13% in Q4FY11 from 10% in Q3FY11. Hence, we believe that with the increase in international orders, Praj’s margins would improve as margins from overseas orders are higher than domestic orders. Page 2 250 200 150 100 50 0
ICICI Securities Limited Increasing ethanol demand, driven by increasing crude prices and countries shifting their dependence in renewable sources of energy, provides a positive outlook for Praj, both in the domestic as well as international markets ICICIdirect.com | Equity Research Revising estimates With the mandatory 5% blending of ethanol with fuel announced by the Government of India, the demand for ethanol in the country was estimated to be ~1000 billion litres in FY11. On the international front, Peru and Argentina have announced 10% blending from 2011 onwards. Also, regions like Latin America, South East Asia and Africa are increasingly looking at expanding facilities for ethanol production. Therefore, with the increasing awareness among countries to shift to renewable sources of energy, we believe the outlook for ethanol demand is positive. We expect the company’s sales growth in FY12E to be higher led by the increasing demand for ethanol. However, margins would see some moderation on the back of higher R&D and employee expenses planned by the company. Hence, we have revised our estimates and introduced the estimates for FY13E. Exhibit 5: Revising estimates FY12E Page 3 FY13 Old New % Change New Revenue 621.3 649.5 4.5 EBITDA 131.3 121.6 (7.4) EBITDA Margin % 21.1 18.7 -242 bps 19.7 PAT 100.4 97.1 (3.3) 101.7 EPS Source: Company, ICICIdirect.com Research 5.5 5.3 (4.1) 5.5 Exhibit 6: World ethanol demand (in million litre) 120000 100000 80000 60000 40000 20000 0 36855 40376 48082 61411 77596 87866 99787 105066 2004 2005 2006 2007 2008 2009 2010 2011 Source: Company, ICICIdirect.com Research Exhibit 7: Crude Price Index (in US$/bbl) 150 130 110 90 70 50 30 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Source: Company, ICICIdirect.com Research Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 697.6 137.1 May-11
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ICICI Securities Limited Praj Industries (PRAIN)

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