Prakash Industries Ltd. (Prakash)


Global sentiments sir! check how commodities fell in China today. Even Indian steel prices seem to have started softening as I mentioned in the Sarda energy thread. Previous quarter nos are backward looking. No doubt the stock is cheap but so are larger caps where funds should flow initially.

(GreyCells) #424

Steel prices in China fell strongly in this month

(VALUE2017) #425

There may be something which we are not aware of.
Receivables rise is not significant.
I am also surprised…
May be irrationality of market or any thing else

(deepuji2008) #426

Any thoughts in this article please…

(GreyCells) #427

Got the following whatsapp fwd


Steel stocks looks vulnerable given the sharp correction in steel prices in China, steel imports have become viable

** Landed cost of HRC Imports from China is ~INR 42000/ tonn v/s Domestic price of INR 46000/ tonne. Whereas the anti-dumping duty price threshold is INR 35000/ tonne.

  • *One can expect prices to correct by INR3000-4000/ tonne over next 2 months. This will trigger earnings downgrade cycle for Indian Steel stocks

  • *Tata steel, SAIL, JSPL appears most at risk For every INR 1000/t correction in EBIDTA the target price of Tata Steel reduces by INR 80/ Share

(GreyCells) #428

I have doubt on this message. It says Landed HRC prices from China comes to 42000/ton. I read various articles on net and also referred a site for prices of HRC in China. It mentions that HRC prices is 3400 yuan. If we convert it into rupees with 10.16 rupee per yuan then we get 3400 X 10.16 = 34544. Now add import duty (10 % import duty, 12% CVD-Countervailing Duty & Spl. CVD of 4%). Then the total price is 34544 X 1.26 (26% import duty) 43525. I have not even added the transport cost. To have the 42000/ton of total import cost the HRC prices should have been 3000-3200 yuan per ton.

Most of the online articles mentions that prices have crashed to 3400-3500 yuan. That said the prices might have crashed more till today but the maths does not match up when I do the calculations.

Also if I refer the site then the price of steel is 4032 yuan, HRC is 3604 yuan, Rebars is 3971 yuan. Obviously the prices will differ region to region but these number (HRC) prices does not matches with the message of landing cost of 42000/ton. According to my calculations the landed cost is 44000 to 45000 per ton if we consider HRC prices of 3400/ton. I haven’t considered the transport and logistic costs in this.

Snapshot of Chinese prices of steel, HRC and rebars from :point_down:

It is clearly evident of steel price correction in Indian market. When I refer the steelmint site the latest prices of Rebars (Ex Delhi) is 38600.

All in all I think the landed cost is between 44000 to 45000 for HRC and even more for Rebars. The import duty structure is 10-12-4 which still makes import non-viable if HRC is at 3400 range. It should go to 3000-3100 range to be import viable. Note: I haven’t added the transport cost (Shipping logistic cost from China to India) in my calculations.

(VALUE2017) #431

One thing to add is HRC is flat product, where as prakash deals in long products.

(GreyCells) #432

Yes, as I mentioned Rebars landed cost is even higher than HRC. Given Rebars is good 400-500 yuan costlier than HRC. Rebars is at least 50K per ton if imported from China. Logistic cost not included (because I dont know the actual shipping cost).

(Mahendra243) #433

(GreyCells) #434

I am not defending Prakash here and believe this ED move is really a bad news for Prakash at least in short term or till the dust settles

But this ED move is against which CoalBlock case? The coal blocks which were cancelled by supreme courts? or is it a fresh issue? Asking because I never tracked these cases.

If it is old issue then whats going to come out of is really a question… I believe a case was filed against it in 2013-14 and nothing came out then… Is this case reopened on the fact that Supreme courts have pressed the investigating agencies on the issue or is there any substantial evidence found?

Nothing is known clearly today

(shikhar mundra) #435

-During Q3FY2019, the Company has achieved Net Sales of Rs.1026 Crores and EBITDA of Rs.206 Crores, reflecting growth of 41 % and 35% respectively over the corresponding
quarter of the last financial year

  • PAT growth of 40 % , 140 cr vs 100 cr last year
    -The increase in the profitability is due to higher production volumes and operational efficiencies.

(sunilgct) #436

Prakash Industries …
11 year FCF = - 324 crores(Negative cash flow)
11 year profit = 2174 crores…

where is the money invested ? company generated 2174 crores in net profit and invested around 2500 crores , ?
where is the return on capital

Company has never paid dividend
Company has never buyback its shares
Share capital increased from 108 to 163 crores .

(narmad) #437

Pipes Demerger

Prakash Industries announced that the hearing of the scheme of arrangement between Prakash Industries and Prakash Pipes (demerger scheme of PVC pipes undertaking) was listed on 10 January 2019 before Hon’ble National Company Law Tribunal, Chandigarh.After the hearing , the order has been reserved by the Hon’ble bench.

(VALUE2017) #438

Free cash flow are after considering CAPEX, one will also have to check the CAPEX done and change in capacity during last 10 years.

One can observe the increases in sales during last 10 years, Price of steel is almost at the same level at it was in 2007-08, volume increase can come with only CAPEX

2007 932
2008 1,252
2009 1,523
2010 1,563
2011 1,658
2012 2,100
2013 2,510
2014 2,595
2015 2,830
2016 2,053
2017 2,174
2018 2,935
2019 4000 (Estimates)

(Krupesh Desai) #439

CAPEX for the last 10 years has been ~3346 Cr. However we can also see sales improving. I believe rather than looking at last 10 years, we should look at the picture post restructuring. ROCE is definitely low for this company but this has been improving recently.Cost of debt ~15% is quite high and even the improved ROCE is not even to even match this. So business doesn’t look attractive from ROCE .
Another major concern is the tax payment- Does anyone know till when will the company continue getting MAT credit, after that the profits would reduce by ~35%

Disc: Invested with next 2-3 year view

(manan1379) #440

supply disruption expected in pellets due to the incident in vale brazil


(GreyCells) #441

(ffaizan) #442

Company consistently improving effeciencies and expanding. Also it has taken 3000 rs increase in prices. I think the promoter pledging and bad news weighs down on this stock. Though the company is having good time.

(Krupesh Desai) #443

Not sure how much of the pressure is due to pledge, I guess its more to do with the bad news. I was invested in Bhansali engineering where promoters had pledged ~65% of their holdings. The stock remained silent for a long time.With future expansions, better visibility and improving financials, the stock got re-rated. This is not to say that pledge is not negative.

(GreyCells) #444

The rise in Iron Ore prices globally and not locally. Domestic Iron ore prices are lower than global ones but what it does is it makes the global steel prices (which could get imported to India) costly and hence a tad more un-feasible to import.

The price hike taken recently is good for the company however the bad news is weighing more in short term which can be taken care off by the following

  • Company does announce integration of Iron ore mines (Profitability boast to the company)
  • Short term trigger is movement on demerger or pipes business.
  • Company report improved results with good steel cycle (not in control of the company)
  • Completion of expansion
  • Reducing further debt and or subscribing of warrants

So short term pain remains but long term gain is dependent upon several factors.

My attempt to talk to company personal via email/phone has not been fruitful.

From here share prices can go down with end product prices going down… so risk is steel cycle and also it could be the reason more gain also