Praj Industries, a key player in the ethanol sector, has been given an "add" rating by Kotak Institutional Equities, with a target price of Rs 880 per share. Analysts at Kotak believe that Praj’s long-standing investments, integrated product offerings, and robust cash flow profile make it an attractive choice in the growing decarbonisation of mobility sector, which is receiving strong policy support.
Kotak projects that Praj will achieve compounded annual growth rates (CAGRs) of 15 percent in revenue, 18 percent in EBITDA, and 22 percent in PAT between FY24 and FY27. The company's EBITDA margin is expected to improve by 80 basis points, reaching 11.5 percent over the next three years. This is attributed to its expansion into new product offerings in bioenergy, engineering services, and the growing share of international revenue.
The brokerage firm notes that, despite its strong growth trajectory over the past five years, Praj trades at a reasonable valuation compared to peers. This is bolstered by superior prospects, higher returns on invested capital, and an increasing commitment to R&D spending.
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In a country like India, which has large coal reserves but lacks lithium resources, biofuels offer an alternative solution for decarbonising mobility, complementing the adoption of electric vehicles (EVs). With policies in India aligning with this goal, Praj’s expertise in biofuels positions it well to capitalize on emerging opportunities.
Praj’s integrated offerings, global experience in using diverse feedstocks, and investments in the bioeconomy will drive business growth both domestically and internationally, analysts said. With a lack of a global ecosystem for Sustainable Aviation Fuel (SAF) and advanced ethanol variants, India’s leadership in the global biofuel alliance further enhances Praj’s global positioning.
The company is working with Oil Marketing Companies (OMCs) on second-generation (2G) ethanol, which could alleviate feedstock limitations and encourage growth in ethanol applications for mobility, particularly in developed markets like the EU and the US. Praj is also poised to leverage its strong cash flow to explore business models beyond EPC, focusing on recurring revenue streams, Kotak analysts further highlighted.
Recently, the company also forecasted three-fold revenue growth by 2030, driven by rising interest and investments in energy transition initiatives. "The current revenues of Praj are close to Rs 3,400 crore annually, and we have a goal to reach Rs 10,000 crore by the year 2030," said Atul Mulay, President - Bioenergy Business, Praj Industries.
On January 9, shares of Praj Industries rose by a percent to Rs 811 apiece. Over the past 3 months, shares of Praj Industries surged 5 percent, as compared to benchmark Nifty 50's 4 percent decline.
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