AN exceptionally better last quarter performance helped Praj Industries report a robust 77% spurt in its full-year net profit to Rs 153.5 crore. The fourth quarter witnessed a spurt in operating margins, more than double to 33.2% and net profits jumped likewise to Rs 58.66 crore. Earlier, the Praj srcip suffered setbacks on bourses following a sedate Q3 performance and worries about the food-vs-fuel debate globally, taking the stock price to Rs 100 in the last week of March 2008. However, investors should not read too much into these quarterly results as the company operates in the business of project execution and hence, its quarterly performances fluctuate. On the contrary, the annual numbers give a better view of the company’ sustainable performance.
For the year ended March 2008, Praj topline grew at a modest 15.5%, but the improvement in operating margins, higher other income and a fall in the effective rate of tax boosted results. At the current price of Rs 199, the scrip is now trading at a P/E of 23.7 based on the EPS for the year ended March 2008.
The important feature of FY08 results was the company’s ability to improve its operating margins, which increased to 20.1% during FY08 against 17.3% during FY07. The commissioning of the company’s manufacturing unit in Kandla SEZ was a key reason behind this. Another factor that helped margins was the increase in the share of export business that earns better margins. In the current year, 50% of the company’s revenues came from overseas markets as against 30% last year.
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