The company is recovering sharply as the increase in infrastructure spending provides a boost to its steel and PVC pipes businesses. Sales volumes for the company’s steel business grew by 39% yoy for Q3FY18, while volumes for its PVC pipes business grew by 45% yoy. As a result, Profit After Tax for 9MFY18 has grown by 401% yoy to Rs234cr.
Prakash Industries is an industrial conglomerate that is involved in the manufacturing of steel products, PVC pipes as well as power generation. The company’s steel capacity stood at 1mn tonne at the end of Q3FY18. The existing capacity for the PVC pipes stands at 55,000tpa and is expected to reach 110,000tpa by September 2019. The power generation capacity of the company stands at 230MW, which is used for both captive consumption as well as commercial generation.
We expect the company to report revenue CAGR of 25.9% over FY17-20E aided by (a) 15.5% CAGR volume growth for steel products over FY17-20E, and (b) ~9.8% CAGR in realizations for steel products. EBITDA margins are also likely to expand by ~636bps owing to improved utilisations for the steel and PVC pipes businesses. The stock is currently trading at 7.0x FY20E EPS.
Prakash Industries is currently trading at Rs 228.7, up by Rs 9.45 or 4.31% from its previous closing of Rs 219.25 on the BSE.