Buy Praj Industries; target of Rs 115: Edelweiss

Edelweiss's research report on Praj Industries

FY18 was challenging for PRAJ as dip in ethanol revenues dented profitability and order intake grew mere 5%. Going ahead, as 2G orders gain momentum (mostly domestic OMC), the company’s FY19/20 new order intake could get a significant leg up. Also, recent management change—Mr. Shishir Joshipura appointed MD & CEO—we believe could be a key turning point in Praj’s growth story given his excellent track record.

Outlook

We expect profitability to ramp up led by pick up in 2G ethanol business and estimate 40% earnings CAGR over FY18-20. Deferment of 2G ethanol ordering by OMCs and probable change in the bio-fuel policy in the backdrop of possible government change continue to remain key risks to our estimates. At CMP, the stock trades at 32x/22x FY19/20E EPS. We maintain ‘BUY’.