Buy Praj Industries; target of Rs 804: Prabhudas Lilladher

Prabhudas Lilladher's research report on Praj Industries

We revise our FY25/26E EPS estimate by -5.8%/-1.4% factoring in increased D&A expenses from the new GenX facility and higher interest costs. Praj Industries (PRJ) reported mixed quarterly performance with revenue falling 5.1% YoY and EBITDA margin expanding by 273bps YoY to 12.4%. Praj’s ETCA business is set to scale up from H2. While some feedstock and supply chain issues still need to be resolved in India’s CBG ecosystem, the enquiry pipeline is strong. Meanwhile, grain-based ethanol continues to gain traction in India and Brazil as an alternative to sugar-based ethanol. Low-carbon ethanol opportunity driven by SAF in the US is worth up to ~$400mn for Praj over the next 4-5 years. The company is also seeing healthy uptake in highcapacity fermenters and ZLD modular solutions.

Outlook

The stock is trading at a P/E of 39.7x/29.6x FY25/26E. We maintain ‘Buy’ rating with a revised TP of Rs804 (Rs815 earlier), valuing the stock at a P/E of 34x FY26E (same as earlier).

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