Concall details from Capital Market (highlights are mine):
Good sugar season will be good for ethanol biz
Order backlog as end of June 30, 2016 was at Rs 1030 crore and of which exports order share was 32% and balance is domestic orders. Of the order backlog share of ethanol orders was 51%, brewery 10% and balance 39% was emerging business.
There were several order wins this quarter. Brewery team won 2 orders for the supply of complete process plants for green-field projects in India. Water and waste water treatment team also won an order in the power sector.
Order intake in Q1FY17 was Rs 280 crore (up from Rs 162 crore in Q1FY16) with most of it come from domestic market with about 92% in domestic market. Of the order intake share of ethanol was 51%, brewery 18% and 21% is emerging business.
Typically a good sugar season will enable the sugar industry to clean up their books. With positive sentiment in the Indian sugar industry on the heels of firming up of sugar prices and good monsoon showers augurs well for capital goods players related to sugar sector. Current mandate is 5% and the target is 10% and the increased ethanol blending will be gain for sugar sector. Increased ethanol blending resulted in improved interest in the sector and the company is in negotiation for newer ethanol capacities.
Integrated Bio-energy Mission of Union Government with an outlay of Rs 10000 crore for next 5 years starting from FY17-18 will enhance the use of ethanol and biogas. Significant part of the funds available in this mission is expected to find way for viability gap funding for 2nd generation ethanol technology plants. With current ethanol prices the 2nd Generation tech ethanol plants seems viable.
As far as Praj Hipurity business, the focus is Pharma and biotech sector. Here the recent development of allowing 74% FDI under automatic route in Pharma sector will augur well for the company. This development will reduce timeline for cross border tie-ups and fund-flow accelerating investment in the sector.
The status quo is maintained as far as Petrobras order is concerned. This order is still forms part of the company's order book. Discussions have opened to shift to the new Contractor and it is reliably understood that there is a strong likelihood of resuming the project this calendar year.
About 78% of the revenue for the quarter ended June 2016 was from domestic market. While the share of ethanol biz was 61%, brewery was 11% and balance 28% was from emerging business.
Lower margin is largely due to change in revenue mix. The share of export orders were lower in first quarter compared to corresponding previous period. The Variable margin moved from 36% to 22% this affected the profitability.
International markets: While Argentina and Peru are promising geography in South America there is specific modernization opportunity available in Central America. The South East Asia market presents newer capacity addition apart from modernization business.
In USA there are commercial size 2nd generation plants in the size of 250 kl/day.
OMCs are expected to invest in about 2-3 ethanol projects based on 2nd gene technology. EOI released by OMC got encouraging response.
The company currently has substantial basket of enquiries for modernization of plants across are business segments of the company. Orders for 2nd generation based ethanol plants are expected to flow in at the end of current fiscal.
Development on the company's own 2nd Generation Integrated Bolt-On Smart Bio-refinery Demonstration Plant is on track. The engineering is complete and we are in discussion with various stakeholders.
Water and waste water business relies on power and F&B sector. The focus now is on improving the ticket size as well as reprocessing technology.