Investing In Value And Multibagger Stocks

PRAJ INDUSTRIES - Multibagger investment for 2009

About the company
Praj Industries has been one of the fancied stock in the recent rally not only among the traders as well as among the investors too. The stock was volatile and spurt on news coming one after another.The company is engaged in Ethanol distillery projects as well as in brewery projects.

Shareholding Pattern : " Its Different "
JM Financial Mutual Fund bought about 5.80 lakh shares of Praj Industries, increasing its stake to 5.25%. Tata Capital holds 7.33%, Rakesh Jhunjhunwala has a 7.3% stake and Vinod Khosla holds 6.15%. Morgan Stanley holds 2.77%. Makes one wonder what is so special about the company?

About The financials
The financial performance of the company for the first quarter ended 30th June 2008 has not been as good as expected. Infact its bottomlines took a hit. YoY, its topline showed a 12% growth at Rs.154.76 crore. Though it has managed to contain its operating expenses, OPM slipped from 28.27% to 20.57% and NPM from 20.47% to 15.99%. Ethanol distillery projects contributed over 85% to the topline, whereas the brewery projects made up for the rest. But forex losses during the quarter dented its earnings.

Positive News In the counter
1. The ability of the company to drive down cost as a result of value engineering exercises undertaken as well as the product mix has helped boost contain the margins at these levels. Praj’s current order-book is pegged at about Rs 950 crore of which 48% is from exports and the rest domestic. Being a net exporter, the current depreciation of rupee would go in favour of the company.

2. Increasing acceptance of ethanol-blended petrol and bio-fuels.

3. With fuel bills touching the sky, biofuels is the way into the future and Praj is ready to capitalize on this. It is setting up its first plant in Louisiana, based on sugarcane juice and if this biofuel gets accepted, Praj would have the whole of North America as a market. In EU, it has a JV - BioCnergy Europa B. V., with Aker Solutions. It has also got orders from European sugar majors such as British Sugar, Suedzucker and Danisco. Its JV in Brazil is expected to help tap opportunities there too but this may take a longer while as not much progress has been made on this JV.


Negative News In the counter
1. Suspection of Govt postponing the October deadline for making it mandatory for another 10% ethanol blending.

About the Stock
Though the prospects for the future is good and likely to be promising , one can have some minor stake in the company . Though attractive levels are expected in drastic falls for investors to invest in.

This post was written by: Franklin Manuel

Franklin Manuel is a professional blogger, web designer and front end web developer. Follow him on Twitter