| Q104 | Q103 | % Change | | Sales | 25.82 | 21.54 | 19.87 |
| Other income | 0.35 | 0.25 | 40.00 |
| Operating profit | 3.81 | 1.52 | 150.66 |
| OPM (%) | 14.76 | 7.06 | - |
| Net profit | 2.95 | 0.89 | 231.46 |
| Net margin (%) | 11.43 | 4.13 | - |
| EPS | 3.63 | 1.38 | - |
| Trailing 12-month EPS | 12.83 |
| Price-earnings ratio | 15.71 |
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Lighting up
With the concept of ethanol as a fuel gaining acceptance, ethanol business continues to be the key earnings driver for PIL. The company's prospects appear bright globally, too. |
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| In 2003, the global demand for ethanol was 35 billion litres and this is expected to jump 50 per cent to 50-60 billion litres by 2010. PIL had recently received international orders worth Rs 80 crore. |
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| The orders from Latin America are viewed as a huge positive for the company, especially since Latin America is known to be bureaucratic and that PIL has beaten competitors in its own backyard. |
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| Another huge positive is the Japanese government's plan to implement 3 per cent ethanol blending. This presents an opportunity for companies with domain expertise like PIL since raw materials for blending need to be imported, feel analysts. |
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| Besides, demand is expected to improve from countries like Thailand, China, Peru and Ecuador which are in various stages of implementing fuel ethanol programmes. |
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| The company says these countries have the potential to form a $150-200 million per year market. PIL expects exports to contribute over 50 per cent of its turnover in FY05. The company expects its turnover to spurt over 50 per cent over FY04. |
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Smoke signals
Any delay in increasing the level of ethanol blending to 10 per cent in India could affect additional investments in the country, which in turn will hit Praj's business. |
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| Another concern is that beyond a certain point, ethanol is not viable as a fuel. Blending of ethanol in petrol is unlikely to cross the 22 per cent level globally. |
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| However, they are unanimous that the positives like the company's strong global presence, technological strength, scalability and execution skills outweigh these concerns. |
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| Growth in consumption of potable alcohol among Asian countries, replacement demand and waste-water minimisation and treatment also offer avenues for growth. At Rs 201, the stock is trading at a trailing 12-month P/E of 15.7x. |
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| Analysts peg an EPS target of Rs 17-18 for FY05. The stock is a good long-term play, says Sagar Patel, analyst at Emkay Research. |
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| "Though present valuations are not cheap, the ample scalability and growth prospects may see shareholders reap rich dividends in two-three years," he adds. |
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