Prakash Industries Ltd: Blasting all the cylinders

Motilal Oswal is bullish on Prakash Industries and has recommended buy rating on the stock with a target price of Rs. 99 in its February 6, 2012 research report. The following are the excerpts from the  report:
Prakash Industries 3QFY12 results were in-line; Greater focus on sponge iron and power sales boosts earnings
 Prakash Industries’ 3QFY12 Adj PAT grew 20% QoQ to INR668m (v/s est INR668m) due to stronger market for
sponge iron and power. EBITDA at INR910m was also broadly in line with our estimate of INR956m.
 Sponge iron realization increased 9% QoQ. PKI sold more sponge iron and power at the cost of steel production
to capitalize on stronger market.
 PKI has entered into a contract with Andhra Pradesh SEB for sale of 27MW power at an average rate of INR3.75/
kwh for next 5 months. Another 40MW capacity will be available for external sales after stabilization of all the
units.
 New Fe-Mn capacity of 24ktpa is being planned in FY13 at a capex of INR600m to leverage on enhanced power.
 Steel production is now being optimized to gain from improved market.
 Stock trades at very attractive FY13E P/E of 2.5x, EV/EBITDA of 2.7x, and P/BV of 0.3x. Maintain Buy.