Accumulate Praj Industries; target of Rs 611: Prabhudas Lilladher

Prabhudas Lilladher's research report on Praj Industries

Praj Industries (PRJ) reported mix quarterly performance with revenue remaining flat YoY, while EBITDA margins expanded 147bps YoY to 8.8%, amidst softening commodities prices. Revenue was impacted due to slowdown in execution of ongoing grain based plants owing to constrain on diversion of rice for ethanol production. However, execution in H2FY24 is expected to pick-up on back of upward revision of rates for grain based Ethanol from OMC’s. EBITDA margins are likely to improve on back of execution of newer contracts and likely pickup of exports orders. Increasing traction from CBG plants and exports opportunities for Engineering and BioEnergy (low carbon ethanol plant opportunity in USA) segment to drive ordering activities going forward. Company is strengthening its distribution channel in Brazil and USA to expand its services business. We remain positive on PRJ in long run, given 1) its strong leadership in domestic ethanol plant (~50-55% market share), 2) increasing traction from CBG plants, 3) focus on future-ready technologies like 2G plants, CBG, ETCA, SAF etc. 4) healthy outlook for engineering segment from exports market and 5) upcoming opportunity from SAF post FY27.

Outlook

The stock is trading at PE of 32.7x/28.6x/24.4x on FY24/25/26E. We roll forward to Sep’25E and maintain ‘Accumulate’ rating on stock with revised TP of Rs 611 (Rs618 earlier) valuing at PE of 30x Sep’25E (33x FY25 earlier).

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