Prakash Industries Q1FY19 Results
- Company achieved highest ever quarterly sales volume of around 2.4 lac tons (+26% YoY)
- Net sales grew 36% YoY to Rs. 985 crores
- EBITDA grew 121% YoY to Rs. 242 crores, EBITDA margin expanded by 940 bps to 24.5%
- PAT for the company grew by 184% YoY to Rs. 169 crores, PAT margins expanded by 636 bps YoY to 10.8%.
- Realisation per ton during the quarter stood at ~ Rs. 37,300/t whereas consolidated EBITDA/t from steel and power business stood at ~ Rs. 9,500/t.
Key Insights and likely impact
- The growth in profitability was on the back of better sales realization (Rs. 37,200/t), higher volumes (2.4 Lac tons), and major cost savings through operational savings.
- Company is operating at ~ 88% of its capacity, capacity utilization to go above 90%
- Company is in process of obtaining final approval for commencing operations in Iron ore mine in Orissa having annual production capacity of 0.5 million ton, ~20% of its iron ore need.
- Company is on track of expanding its sponge iron capacity upto 1.4 Mn tons by Mar’19. It plans to expand steel making shop capacity also in future.
- The company has successfully commissioned Flexible Packaging plant to manufacture high performance barrier films and laminates.
- The company has received consent from key stakeholders for demerging its PVC Pipes & Fittings business
- Higher capacity utilization to boost the revenues
- Captive sourcing of iron ore mines to decrease iron ore cost for the company as ~20% of iron ore needs will be sourced from captive mines
- Replacement of old furnaces by new ones to improve productivity and reduce power costs
- Demerger of PVC business to prove value unlocking for the business as Steel business margins are higher than the PVC business
- Company to increase steel melting shop capacity in phased manner once sponge iron plant capacity is increased.
How it fares among the peers?
The company is trading at EV/EBITDA of 5.5x FY18 and a P/E of 6.5x FY18 which is lowest among the peers.
Prakash Industries (CMP Rs. 160, M Cap 2,508 crores, EV/EBITDA 5.5x FY18)