dynamic levels cosmo films · 2018-01-16 · page 3 source: company, praj industries ltd. praj is a...
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Page 2 Source: Company, www.dynamiclevels.com
Praj Industries Ltd- Integrating Transformation
Praj Industries Ltd 3
Business Lines 4
Subsidiaries 5
Praj Around the world 6
Emerging Business 7
Company Financials 8
Shareholding Pattern 12
Industry Outlook 13
Key Developments 14
Praj Valuation & Investment Rationale 16
Page 3 Source: Company, www.dynamiclevels.com
Praj Industries Ltd.
Praj is a global process solutions company driven by innovation and integration capabilities, offers solutions to add significant value to bio-ethanol facilities, brewery plants, water & wastewater treatment systems, critical process equipment & systems, HiPurity solutions and bio-products. Over the past 3 decades, Praj has focused on environment, energy and agri process led applications. Praj has been a trusted partner for process engineering, plant & critical equipment and systems with over 600 references across five continents. Solutions offered by Praj are backed by its state of the art R&D Centre called Matrix.
Dynamic Levels is positive on the prospects on Praj as:
The consolidated order backlog as on March 31, 2016 stood at Rs. 960 crore which comprised of 40% international orders.
Ethanol blending in India reached 3.2% in the year 2015-16. OMCs have finalized contracts to procure 1.3 bn liter (equivalent to 5%) for the first time since the mandate is in place.
Lok Sabha has passed the Industries (Development and Regulation) Amendment Bill, which transfers the control of beverage and industrial alcohol to the states; whereas fuel ethanol will be a central government subject. This is a positive movement for ethanol blending program.
Praj commissioned a 200 m 3 /day multi-product plant based on the novel Ecosmart technology in Poland. It is capable of reducing water and steam consumption by upto 40%.
Water and waste water treatment group recently commissioned zero liquid discharge ETP for a yarn manufacturing facility of one of the largest textile companies in Central India.
Praj Share Price Performance
EXCHANGE SYMBOL PRAJ INDUSTRIES
Current Price * (Rs.) 87.85 Face Value (Rs.) 2 52 Week High (Rs.) 117.00 52 Week Low (Rs.) 68.80 Life Time high (Rs.) 272.95 Life Time low (Rs.) 0.15 ADM 4.39 Average Volume 733556 1 Month Return (%) -6.09 P/E Ratio (x) 22.97 Book Value 34.95 Market Cap 1605.94 (Cr) % of Promoter holding pledged 0
CMP Rs 87.85 Target: 97 FY16P/E: 22.97
COMPANY PROFILE OF PRAJ
Date of Incorporation 08-Nov-1985
Date of Listing 22-May-1995
Management
Name Designation
Pramod Chaudhari Executive Chairman
Gajanan Nabar MD & CEO
Berjis Desai Non ED
Daljit Mirchandani Non ED
Sivaramakrishnan S Iyer Non ED
Parimal Chaudhari Non ED
Kishor Chaukar Non ED
Prakash Kulkarni Non ED
Rajiv Maliwal Non ED
Registered Office Address
"Praj Tower", S.No. 274 & 275/2, Bhumkar Chowk-Hinjewadi
Road,Hinjewadi,411057,Pune,India Website
http://www.praj.net
Page 4 Source: Company, www.dynamiclevels.com
Business Lines:
What started off as an entrepreneurial venture 3 decades ago is
considered to be India’s most successful biofuels Company, taking
biobased technologies from India to the World. Today, Praj offers
innovative solutions for beverage alcohol and bioethanol plant,
brewery, water & wastewater treatment plant, critical process
equipment and systems and bioproducts.
A globally leading Company with presence in more than 60 countries
across 5 continents, Praj has acquired an international repute for
responsible and reliable solutions.
The business verticals of Praj are defined along 5 blocks:
Ethanol & Brewery Plants:
Praj enjoys an unique position in the world of ethanol technology by
virtue of its expertise which cuts across a variety of sugar to starch
based feedstocks. Praj provides holistic solutions for various grades of
ethanol (beverage, fuel, industrial, pharma and perfumery) and
brewery plants encompassing range of technologies and systems for
water & wastewater management.
Water & Wastewater Treatment Plants:
Praj offers integrated water & wastewater treatment systems and has
already made a beginning in the industrial sector with a wide range of
solutions. This vertical addresses industrial applications for high quality
water, complex effluent treatment including recycle, reuse and zero
liquid discharge plants.
Critical Process Equipment System:
This vertical serves a wider sectoral requirement for high end
equipment & systems finding application in the oil & gas,
petrochemical, fertilizer, chemicals industry. India is emerging as a
sourcing hub for engineered products, especially those which have a
level of criticality in terms of material of construction, complexity of
fabrication and standards & codes to be followed. Praj has
demonstrated capabilities wherein it supplies critical process
equipment & systems to a number of domestic and global players.
Page 5 Source: Company, www.dynamiclevels.com
High Purity Systems:
Addressing the pharmaceutical, biotech and F & B sector, Praj acquired
Neela Systems (now Praj Hipurity Systems), a Company engaged in
providing hi purity water and hygienic systems to the pharma industry.
Praj plans to extend its footprints in the hygienic engineering and
systems business. It has the capability of providing end-to-end
solutions for the pharma, biotech, food & beverage sector. This will be
an area of special focus where Praj will deploy combined experience of
Neela and Praj
BioProducts:
Praj recently announced its entry into the biotech products business
with launch of its livestock feed health & nutrition business. Other than
this, Praj is also working with biochemicals and human health &
nutrition products which are presently in different stages of
development.
The backbone of Praj’s technology development is Praj Matrix, the
Innovation Center. Praj Matrix is working on bioethanol and
biochemicals processes.
Subsidiaries:
Page 6 Source: Company, www.dynamiclevels.com
Praj Around the world:
Praj has been a trusted partner to customers around the world since the last 3 decades for innovative, sustainable solutions in ethanol, brewery and Water & Wastewater Treatment Systems, process equipment and bio-products like distillery bio-consumables. South America: Colombia: Partners in fuel ethanol program Colombia's fuel ethanol program was launched in 2002 when the government passed a law mandating use of fuel ethanol in gasoline. Praj is very proud to be associated with the fuel ethanol programme of Colombia by way of installing ethanol production plants. These plants serve as a benchmark in the entire South American continent. Europe: Largest Bioethanol plant commissioned in UK Praj has completed a decade in Europe with more than 20 references. Praj has commissioned the 2nd largest bioethanol plant in UK for Vivergo Fuels which has a capacity of 420 million litres per annum. Since 2006, an increasing share of bioethanol is used in gasoline in EU. Praj works with marquee customers within EU. Praj has supplied technology and proprietary equipment to fuel and beverage ethanol plants in UK, Poland, Belgium, Hungary, Germany, Bulgaria, etc
South East Asia: Glorious 20 years and many more to come South East Asia has served as a beachhead for Praj in the international market. Praj entered the South east Asian market in 1992 and the 1st plant of 120 Kilo Litres per day was commissioned in 1994 at Lawang, Indonesia. Since then Praj has installed more than 40 plants, holding a market share of more than 60%. Praj has supplied plants in Thailand, Indonesia, Philippines, Australia, Cambodia, Vietnam and Japan. The predominant feedstock for bioethanol in SEA is Cassava, Cane Molasses & Cane juice. Thailand has implemented its biofuels program successfully and phased out premium gasoline with ‘gasohol’. Philippines has mandated 10% ethanol blending, while Australia has a 2% mandate for blending. Japan imports ethanol for production of ETBE. Vietnam has also installed facilities for blending. Africa: Africa Is Regarded As One Of The World’s Latest In Emerging Economies Praj Has Been a Part Of This Upbeat Economy For More Than a Decade. With its Plants in Ethiopia, Kenya, Tanzania, Nigeria, Zimbabwe, Sierra Leone, Swaziland, Mozambique, Malawi, South Africa, Praj Enjoys a Sizable Share Of The Production Plants In Africa. Praj Takes Great Pride To Be Associated With Clients Like Illovo- The Largest Ethanol Producer In South Africa, Addax, Royal Swaziland Sugar Corporation, Agro Chemical And Food Company, Etc.
PRAJ serves as a benchmark in
the entire South American
continent
Page 7 Source: Company, www.dynamiclevels.com
Emerging Business:
Critical Process Equipment:
Critical process Equipment and Systems (CPES) business leverages
Praj's Process Engineering and Manufacturing Capabilities. Since then,
Praj has committed dedicated resources in terms of engineering and
manufacturing facilities at 3 locations for fabrication of high thick
materials like carbon steel¸ other higher alloys along with stainless
steel & cladded equipment. All the facilities are ISO 9001: 2008, ASME-
U/ U2 and CE Marking certified. Facilities also have IBR, CCOE, NB, ISO
14001 and OHSAS 18001 certifications.
Praj provides critical process equipment & systems to various sectors
like chemical, oil & gas, petrochemical, fertilizer, pharma & biotech,
food & beverage etc to clients globally. Praj follows international
design codes like ASME Section VIII – Div 1 & Div 2, PED, TEMA, BS
5500, API 650 and AD-Merkblatter. It also supplies in accordance with
country specific requirements like IBR, DOSH, GOST (TR), MOM,
UkrSEPRO, AS etc. Praj has served clients in India, Singapore,
Malaysia, Germany, Russia, Ukraine, Fiji, Oman, Saudi Arabia and
Italy.
Praj has successfully worked with various esteemed EPC partners like
LINDE, Uhde, Saipem, Toyo Engineering, SNC Lavalin, Aker Solutions,
Jacobs, Fluor, Lurgi etc.
Some of its valued customers globally are GE Oil & Gas, Bayer,
Lanxess, BASF, DOW, SRF, Lupin, Biocon (Malaysia), Cargill etc.
Water and Wastewater Treatment Solutions
Water and waste water treatment business has its origin in Praj's
understanding of challenging distillery effluent.
This business line rests on the three pillars of -
Quality of water
Complexity of Effluent
Reduce, Recycle, Reuse and ZLD
CETP at Thirupur textile belt is a noteworthy example. The industries Praj serves are - textiles, pharmaceuticals, food and beverages, power. Some of our valued customers are Lucky Spinning (Thailand), Torrent Pharma and many more.
Some of its valued customers globally
are GE Oil & Gas, Bayer, Lanxess, BASF,
DOW, SRF, Lupin, Biocon(Malaysia),
Cargill etc.
Praj has served clients in India,
Singapore, Malaysia, Germany, Russia,
Ukraine, Fiji, Oman, Saudi Arabia, and
Italy.
Page 8 Source: Company, www.dynamiclevels.com
Company Financials:
Income Statement (in Cr) FY 2015 FY 2016 % Growth
Net Sales/Income from operations
1,011.85 1,014.13 0.23%
Other Operating Income -- 1.67
Total Income From Operations 1,011.85 1,015.80 0.39%
Increase/Decrease in Stocks 21.55 -0.22
Consumption of Raw Materials 484.41 467.19 -3.55%
Employees Cost 133.12 151.4 13.73%
Depreciation 37.83 34.45
Other Expenses 280.11 286.55
Total Expenditure 957.02 939.37 -1.84%
Operating Profit 54.83 76.43 39.39%
Other Income 34.02 14.57 -57.17%
P/L Before Int., Excpt. Items & Tax 88.85 91
Interest 2.47 1.31 -46.96%
P/L Before Exceptional Items & Tax
86.38 89.69
P/L Before Tax 86.38 89.69
Tax 18.69 20.31
P/L After Tax from Ordinary Activities
67.69 69.38
PAT 78.23* 69.46 -11.21%
Minority Interest -1.96 -0.01
Net Profit/(Loss) For the Period 76.27 69.45 -8.94%
Prior Year Adjustments 10.54 0.08
Equity Share Capital 35.49 35.59
Reserves 586.67 625.51 6.62%
EPS (Rs.) 4.3 3.91 -9.07%
WACC FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
Equity
Cost of Equity 11.5% 10.7% 11.6% 10.6% 11.8%
Weight of Equity
98.5% 97.9% 97.8% 98.5% 99.0%
Debt
Cost of Debt 6.6% 8.3% 8.6% 9.8% 7.5%
Weight of Debt
1.5% 2.1% 2.2% 1.5% 1.0%
WACC 11.4% 10.7% 11.5% 10.6% 11.7%
--
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
FY 2
01
2
FY 2
01
3
FY 2
01
4
FY 2
01
5
FY 2
01
6
Cost of Equity
Weight of Equity
Cost of Debt
Weight of Debt
Income Statement Analysis:
1. In FY 16 the Praj maintained its topline at par compared to last year but reduced the expenditure by 1.84% inspite of increase in Employee cost
2. Other Income increased by 40%
3. FY15 PAT includes Rs 11.9 crore (pre-tax) capital gain on sale of office building at Bavdhan, Pune and write back of Rs 10.76 crore towards excess provision for tax
4. Reserves of the company have gone up by 6.62%.
5. PAT down by 11.2%
Note – all figures on consolidated basis, i.e. Praj Industries India, its local execution companies and subsidiaries.
Page 9 Source: Company, www.dynamiclevels.com
Balance Sheet (In Mn) FY 2014 FY 2015 FY 2016
ASSETS
Cash And Equivalents 240.9 755.0 818.5
Short Term Investments 1,183.2 1,714.8 1,159.5
Total Cash & ST Investments 1,424.0 2,469.8 1,978.0
Accounts & Notes Receivable 3,202.7 2,804.8 3,671.0
Total Receivables 3,202.7 2,804.8 3,671.0
Inventories 1,222.1 976.1 1,822.0
Prepaid Exp. 998.5 1,295.4 -
Restricted Cash 8.6 9.0 -
Other Current Assets 2,368.7 1,303.5 694.1
Total Current Assets 9,224.5 8,858.6 8,165.1
Net Property, Plant & Equipment 2,642.6 2,382.2 2,231.8
Long-term Investments 50.1 100.1 293.3
Deferred Charges, LT 17.4 20.9 -
Other Long-Term Assets 823.2 794.3 925.9
Total Assets 12,757.7 12,156.1 11,616.1
LIABILITIES
Short-term Borrowings 211.8 170.7 159.1
Accounts Payable 1,998.2 1,772.4 2,071.5
Curr. Income Taxes Payable 1,550.3 745.8 -
Other Current Liabilities 2,763.8 2,966.1 2,640.3
Total Current Liabilities 6,524.2 5,655.0 4,870.9
Long-Term Debt 1.5 2.0 1.2
Other Non-Current Liabilities 192.8 129.1 130.2
Total Liabilities 6,718.5 5,786.1 5,002.3
Minority Interest 214.0 148.4 2.8
Additional Paid In Capital 924.9 924.9 355.9
Comprehensive Inc. and Other 4,900.3 5,296.6 6,255.1
Total Common Equity 6,039.2 6,370.0 6,613.8
Total Equity 6,039.2 6,370.0 6,613.8
Total Liabilities And Equity 12,757.7 12,156.1 11,616.1
Book Value/Share 32.8 35.1 37.2
Balance Sheet Analysis
Company’s long term
investment has increased
from 100 Mn to 293 Mn
in 2 years.
Praj has reduced its short
term borrowings
Praj has reduced its long
term debt by 430% from
2 to 1.2 Mn
Book value has increased
from by 10% from 35.1 to
37.2 per share
Total liabilities is
decreasing YoY from
6718 in FY14 to 5002 in
FY16
Page 10 Source: Company, www.dynamiclevels.com
Cash Flow ( In Mn) FY 2013 FY 2014 FY 2015
Net Profit/Loss Before Extraordinary Items And Tax
80.72 78.44 68.16
Net CashFlow From Operating Activities 20.27 27.22 141.18
Net Cash Used In Investing Activities 21.16 16.07 -72.87
Net Cash Used From Financing Activities -48.88 -46.32 -33.88
Foreign Exchange Gains / Losses 0.87 0.81 0
Net Inc/Dec In Cash And Cash Equivalents -6.57 -2.21 34.43
Cash And Cash Equivalents Begin of Year
33.79 27.22 28.37
Cash And Cash Equivalents End Of Year
27.22 25 62.8
Capital Structure FY 2014 FY 2015 FY 2016
Millions % of Total Millions % of Total
Millions % of Total
Market Cap 9,316.9 97.8% 11,073.8 98.5% 15,873.1 99.0%
ST Borrowings 211.8 2.2% 170.7 1.5% 159.1 1.0%
LT Borrowings 1.5 0.0% 2.0 0.0% 1.2 0.0%
Pref Equity 0.0 0.0% 0.0 0.0% 0.0 0.0%
Total Capital 9,530.2 100.0% 11,246.5 100.0% 16,033.4 100.0%
Key Financials FY 2014 FY 2015 FY 2016
Total Revenue 9,858.4 10,118.5 10,141.3
Growth Over Prior Year 7.3% 2.6% 0.2%
EBITDA 861.6 844.1 1,098.6
Margin % 8.7% 8.3% 10.8%
EBIT 624.0 465.8 754.1
Margin % 6.3% 4.6% 7.4%
Net Income 546.3 762.7 694.5
Margin % 5.5% 7.5% 6.8%
Diluted EPS Excl. Extra Items 3.08 4.29 3.88
Growth Over Prior Year (19.6%) 39.3% (9.6%)
Page 11 Source: Company, www.dynamiclevels.com
Ratios FY 2014
FY 2015
FY 2016
Profitability
Return on Assets 4.3% 6.1% 5.8%
Return on Capital 9.3% 12.6% 10.6%
Return on Equity 9.5% 12.7% 10.8%
Margin Analysis
EBITDA Margin 8.7% 8.3% 10.8%
EBIT Margin 6.3% 4.6% 7.4%
Earnings from Cont. Ops Margin
6.3% 4.6% 7.4%
Net Income Margin 5.5% 7.5% 6.8%
Normalized Net Income Margin
5.5% 7.5% 6.8%
Free Cash Flow Margin -4.7% 13.9% --
Asset Turnover
Total Asset Turnover 0.8x 0.8x 0.9x
Fixed Asset Turnover 3.8x 4.0x 4.4x
Accounts Receivable Turnover
3.1x 3.4x 3.1x
Short Term Liquidity
Current Ratio 1.4x 1.6x 1.7x
Quick Ratio 0.7x 0.9x 1.2x
Cash from Ops. To Curr Liab
0.2x 0.4x 0.4x
Avg. Days Sales Out. 117.7x 108.4x 116.9x
Long Term Solvency
Total Debt/Equity 3.5% 2.7% 2.4%
Total Debt/Capital 3.4% 2.6% 2.4%
LT Debt/Equity 0.0% 0.0% 0.0%
LT Debt/Capital 0.0% 0.0% 0.0%
Total Liabilities/Total Assets
1.5% 1.1% 1.1%
EBIT / Interest Exp. 43.35x 18.88x 57.56x
EBITDA / Interest Exp. 59.86x 34.21x 83.86x
Total Debt/EBITDA 0.25x 0.20x 0.15x
Net Debt/EBITDA -1.41x -2.72x -1.65x
Ratio Analysis:
Profitability ratios indicate that Praj Returns have
improved YoY, indicating that the management is
efficiently using its assets to generate earnings and Praj
is able to generate good return with the money
shareholders have invested
EBITDA margins have improved which is an indication the
revenue that is left with the Company after it has
deducted all the expenses has increased YoY.
Asset Turnover ratio indicates that Co is efficiently
deploying its assets to generate the revenue.
Co’s Short term liquidity has improved but it is not able to
meet the industry standards of minimum 2, which
signifies that the Company might have liquidity problems
in paying its short term debt on time.
Praj has high Debt which has decreased YoY, it is a
positive sign as it is reducing its debt
Page 12 Source: Company, www.dynamiclevels.com
Shareholding Pattern
Shareholding Pattern Mar-16 Dec-15 Sep-15 Jun-15 Mar-15
Promoter and Promoter Group (%) 33.88 33.90 33.90 33.98 33.98
Indian 33.88 33.90 33.90 33.98 33.98
Foreign NIL NIL NIL NIL NIL
Institutions (%) 25.94 24.87 27.17 25.33 22.92
FII 6.21 0.72 8.19 7.11 7.45
DII 19.73 24.15 18.98 18.22 15.47
NonInstitutions (%) 40.18 41.23 38.94 40.69 43.10
Bodies Corporate NIL NIL 11.62 12.20 12.55
Others 40.18 41.23 27.31 28.49 30.56
Custodians NIL NIL NIL NIL NIL
Total no. of shares (cr.) 17.80 17.79 17.79 17.75 17.75
FII’s have increased their stake in FY16 from 0.72 to 6.21 but DII has decreased from 24.15 to 19.73
Persons holding securities more than 1% of total number of shares under category Public Shareholding.
Category Mar-16 Dec-15 Sep-15 Jun-15 Mar-15
Parimal Chaudhari Promoters 12.14 12.14 12.14 12.17 12.17
Pramod Chaudhari Promoters 21.74 21.75 21.75 21.81 21.81
Bodies Corporate NonPromoters 12.3 12.43 NIL NIL NIL
Canara Robeco Mutual Fund A/c Canara Robeco Emerging Equities
NonPromoters NIL NIL 1.67 1.24 NIL
Foreign Individuals or NRI NonPromoters 2.75 NIL NIL NIL NIL
Government Pension Fund Global NonPromoters NIL NIL 2.09 2.09 2.09
Hdfc Trustee Company Limited-Hdfc Equity Fund
NonPromoters 8.97 8.98 8.98 9 9
IDFC Infrastructure Fund NonPromoters NIL NIL 1.01 NIL NIL
Lic Of India Market Plus 1 Growth Fund NonPromoters 2.85 2.85 3.22 3.96 4.01
Sundaram Mutual Fund A/C Sundaram Smile Fund
NonPromoters 2.05 2.05 3.5 2.43 NIL
Tata Capital Financial Services Ltd NonPromoters NIL 7.55 7.55 7.56 7.56
Vinod Khosla NonPromoters 1.61 1.61 1.61 1.61 1.61
Promoters of PRAJ have kept their investment constant throughout the year
Page 13 Source: Company, www.dynamiclevels.com
Industry outlook:
Inflow of foreign investments
Cumulative FDI inflows increased to US$ 26.3 billion in FY16* from US$ 8.9 billion in FY10.
The government’s increasing focus on attracting foreign investors in manufacturing and infrastructure is likely to boost FDI in the sector.
• FDI inflows includes Automobile industry, Electrical equipment, Miscellaneous mechanical and engineering industry, Industrial machinery, Machine tools, Agriculture machinery, Earth-moving machinery and Industrial instrument
Key categories of exports
Transport equipment (which includes Auto & auto component including Aircraft and ship boats) is the leading contributor to engineering exports accountingfor 34.5 per cent of the total engineering exports in FY 15.
Iron & Steel and products made of Iron & Steel have accounted around 22.9 per cent market share while industrial machinery including electrical machinery accounted 21.9 per cent of the total engineering exports in FY15.
Others commodities includes Medical and Scientific instruments, Hand tools & Cutting tools, Bicycle parts, Office equipments, Prime Mica & Mica Products etc. accounted 8.7 per cent of the total engineering exports in FY15.
Market size The capital goods & engineering turnover in India is expected to reach US$ 125.4 billion by FY17. Engineering exports from India in FY 2014-15 stood at US$ 70.7 billion registering a growth of 14.6 per cent over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise. India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports. Recently, India's engineering exports to Japan and South Korea have also increased with shipments to these two countries rising by 16 and 60 per cent respectively.
Government Initiative
The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100 per cent FDI. With the aim to boost the manufacturing sector, the government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles. It has also reduced the basic customs duty from 10 per cent to 5 per cent on forged steel
rings.
Page 14 Source: Company, www.dynamiclevels.com
Key Development
Stable performance in the midst of volatile macro-economic external environment and sombre international markets – a result of transformation efforts Key imperative lies in leveraging established core businesses across geographies and scaling up emerging businesses Rigor in operational excellence reflected in operating profit. Ethanol business – Positive ecosystem in creation in India
Ethanol blending reaches 3.2% in India in the year 2015-16
OMCs have finalized contracts for 1.3 bn liter ethanol for the coming year (equivalent to 5% blending) - first time since the mandate is in place
Lok Sabha passes the Industries (Development and Regulation) Amendment Bill - fuel ethanol becomes a central government subject, facilitates inter-state transport of fuel ethanol
Prohibition of beverage alcohol in Bihar – OMCs asked to maximize fuel ethanol procurement from Bihar, will compensate for reduction in ethanol production from drought affected states
Global ethanol markets developments
Argentina increases blending mandate from 10 to 12%, plans to go for 20% by 2019 and eventually to 26%, will need 1.75 bn liter additional capacity
Queensland, Australia passes bill for 3% blending
Thailand exploring cassava feedstock to combat drought situation, with 20% blending, ethanol requirement will increase from the current 3.5 mn daily
Mexico working on blending program
Brewery business
Consolidation among global brewers, structural changes in the market place, more brown-field capacity build-outs
Division of Andhra Pradesh and Telangana creates opportunities for green-field capacities in Andhra due to separate tax and excise regime of the two states
Internationalization program being pursued in select geographies
Page 15 Source: Company, www.dynamiclevels.com
Praj HiPurity Systems
Government set to propel pharma industry to the next level of innovation – positive for Praj Hipurity
Indian pharma industry gearing up for biosimilars
Internationalization of PHS on track Critical process equipment & systems
India set to move to Bharat VI, Indian refineries to invest of Rs 40,000 crore
Petrobras order continues to be dormant, update after a quarter (Q2 FY 17)
Commissioning of ethanol plant based on Ecosmart technology in Europe
200 m3/day ethanol plant in Poland
Upto 40% energy and water reduction
Water and waste water treatment team commissions multiple effect evaporation and ATFD based zero liquid discharge ETP for yarn manufacturing facility of one of the largest textile companies in India
Page 16 Source: Company, www.dynamiclevels.com
Praj Valuations & Investment Rationale
An improving trend visible over the last few years due to Internationalization of Brewery and Emerging Businesses, particularly HiPurity Systems and Environment Business of Water & Wastewater Treatment Systems; Harnessing the existing base of Ethanol/Alcohol Plants through modernization and retrofit solutions; Enhancing the wallet share of HiPurity Systems business and adding value added services across businesses for recurring revenue. Effort is on-going to maximize value through intake of better quality orders; following more stringent commercial and financial discipline; incorporate excellence in all aspects of project/services delivery to enhance customer value. Recently, Praj acquired 20% stake for INR350mn in Praj HiPurity Systems and made it a wholly‐owned subsidiary.
Praj has diversified its revenue base over the past four‐five years and entered new zones like critical process. equipment, waste water, Neela.
Led by global references and ethanol blending mandates in key export regions like US, Brazil, Columbia, Peru, Thailand, Malaysia etc, Praj has strong presence in the global ethanol market. Its brewery business recently bagged 2 large projects overseas.
It has been able to reduce project cost YoY
Praj has been catering to needs of industries like textile and tannery that have been served notices to pursue technology‐intensive, value‐accretive business. The company is eyeing tie‐ups with EPC projects for industrial waste water orders.
Management expects strong traction in ethanol equipment ordering from Argentina, Columbia, Peru, etc., led by higher mandates in respective countries.
Around 15% of global ethanol market globally is non‐fuel based which is prime market for PRAJ.
Management expects investments in gas and downstream processing to continue inspite of oil sector facing challenges in terms of low crude prices.
We initiate coverage on Cosmo Films Ltd as a BUY @320-340 with a target of Rs 450 representing a potential
upside of 30% from the buy price. COSMO FILMS is trading at a low PE of 8.9. We are positive on the company
prospects due to:
We initiate coverage on Praj Industries Ltd as a BUY @82-83 with a target of Rs 97 representing a potential
upside of 20% from the buy price Praj is trading at a PE of 27.
We are positive on the company prospects as Praj expects to improve its order book and improve its EBITDA
margins in the years to come. It also expects Internationalization of Brewery and Emerging Businesses,
significant growth in MPS (model process business) in pharmaceutical and biotech and this is on the back of
biosimilars. Also exports of Praj HiPurity business which is again focused on pharmaceuticals and biotech, is
seeing growth potential. So, there are couple of businesses in which Praj expects growth in future.
Page 17 Source: Company, www.dynamiclevels.com
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