Prakash Industries Ltd. (Prakash)

(saumya) #122

I work in real estate company in chattisgarh
Ordered tmt 6 ton 16mm today only
Cost me 38275 plus 18% gst per ton from raipur
And as per my understanding & dealer these rates are new normal.

(VALUE2017) #123

Thanks @saumya2010, and just to add that 16mm TMT is the cheapest and the thinner the TMT the costlier it gets ex 6MM costlier then 8MM (Milimeter).
So excluding all the retailer margin and other cost I think our current valuation @ Rs 35000/- is fairly conservative.

Difference in opinion advising loopholes in our valuation are welcomed.

(VALUE2017) #124

In my opinion China is having their own sets of problem and they will now focus on quality Steel rather then Cheap steel. I see a paradigm shift for Steel Industry in India.

We will have to fathom the Pollution problem in China to have an understanding. China increasing its capacity by 8 times in less then 20 years, just try to imagine the cost to the environment.
Steel capacities(Excess) in China are being permanently closed down and it is not just normal winter shut down.

(blueeyedinvestor) #125

Yes indeed it is a paradigm shift. Let’s see how companies ride on to this and justify valuation.

(saumya) #126

Current Base TMT RATE QUOTED DIRECTLY from the
Company is 12mm 35900 per ton without any dealer commision and excluding tax and unloading.
Other sizes are quoted in relaion to 12mm
Like +600,+2200 etc.

(Mayank Narula) #127

This gives better picture. Let’s see if prices are sustainable or not.

(phreak) #128

If the govt. tries to intervene, it might be shooting itself in the foot considering a majority of the NPAs are from the steel sector. All the talk of deleveraging, restructuring and NPA resolution will go to dust. It is in the govt.'s best interests that Essar Steel, Bhushan Steel and Monnet Ispat find takers at good valuations.

(phreak) #129

I searched a bit and found these.

Quoting from article from 2010.

Building a 13 million tonne steel plant could cost around Rs. 64,500 crore

That works out to roughly Rs.50k per ton and this was back in 2010.

Now more recently from 2016, see this article

The EV per ton has been known to rise viciously when prices rise: The EV for steel stocks is $800-1,000 per ton at present but could easily rise to $1,500/t+ levels if macro remains supportive.

That works out to a EV/ton of Rs.65,000 conservatively and close to 1 lakh if macro is supportive.

Going by this, I think conservatively 1 million ton capacity should be valued at 6500 Crores.

(blueeyedinvestor) #130

The article by CS also says that historically the rally last for 9 to 12 months.

Also we all know that Fed has indicated for three hikes in interest rate over next 15 months which is highly certain…and we all know how rise in interest rate will strengthen dollar and will have an impact on commodity prices. This together with softening of Chinese demand pose significant risk…

Above all equity dilution is round the corner…

(blueeyedinvestor) #131

Further CS did not raised the target when cycle was turning around…when everybody in the world came across the reversing cycle news and when stock already rallied nearly 150 to 300% in all cases…dey came out with the grand outlook…

(blueeyedinvestor) #132

Industry is no doubt in sweet spot…but now after so much of run up also throwing up considerable risk

(VALUE2017) #133

Even after so much of run up I find the company to be under valued as per my valuation. However regarding current rally in the stock and that it has already run up a lot, I was going through its 10 year charts and found that its life time high was Rs 335 in 2008 and around Rs 235 in 2010. It is however true that past performance do not guarantee the future prospects of a company.

However, what I liked about this company was that its cash flow from operation was healthy even during the period of downtrend in Steel Sector. This company is comparatively small as compared to TATA Steel and JSW and the business structure is also simple and easy to understand and thats why I have not invested in Blue Chip Companies like TATA Steel and JSW but in Prakash. The balance sheet is small and is easy to understand.

It seems comparatively easy to forecast the earning in such kind of companies and gives me comfort for investment.


I did not understand your methodolgy to arrive at EV from steel prices.

Why do you think all positives are doiscounted? even promoters don’t know the full impact of own raw material before mines open and raw material flows to furnaces. The ore is still in mother earth to make any definitive impact.

Can steel prices not go up from here?

What are negatives in your mind apart from steel prices?

(blueeyedinvestor) #135

Yeah the prices can have upward movement, but I believe there will be 10 to 15% intermittent correction. Also I do not think much upside in steel prices is warranted from current levels. Most of the positives are already priced in is what I believe. Besides the stock is trading closer to its fair value so I do not know how much juice is still left.

Nobody can predict the unsustainable rally. My two cents are this, this counter will offer more from competitive intensity perspective in terms of how much value the Team can add by quickly securing all approvals for captive mine and convert the same into real cost saving.

(VALUE2017) #136

I think average price of Rs 35000/- is very much sustainable in the long run and even at this price sufficient head way is visible with ample margin of safety.

(Tarun) #137

Just glanced through this report… Pretty detailed. Will go through in detail over the weekend.

(Raj A A) #139

Very informative. Prakash Ind is missing in the rpt. While JSPL,NMDC,JSW are given BUY, SAIL a clear SELL while TATA Steel is given Neutral Reco.

(ffaizan) #142

Further FCCBs are converted now the outstanding shares has increased from 15.26 cr to 15.43 cr. Against $ 2.5 million FCCBs 16, 01, 442 equity shares were issued which at current market price of 218.5 works out to be 35 cr approx.
Not sure how the maths of conversion works here.

(atul1082) #143

The conversion has been done at around Rs 100 per share.As per my understanding, the conversion or refund of capital is agreed at the time of FCCB purchase on the basis of prevailing price of share at that point of time and exercise of option remains with the buyer of FCCB. Obviously share price has increased considerably and therefore the conversion.
The other boarders may pl. confirm.

(tejas2677) #144

you are right Atul. there is a possibility that some of these shares may be offloaded to book instant profit.