Buy Praj Industries; target of Rs 804 Prabhudas Lilladher

Prabhudas Lilladher's research report on Praj Industries

We revise our FY25E EPS estimate by -2.6% factoring in higher D&A and interest costs from the new GenX facility and lower execution in Bio Energy. Praj Industries (PRJ) reported mixed quarterly performance with revenue falling 7.5% YoY and EBITDA margin expanding by 271bps YoY to 11.5%. Starchbased ethanol plants continue to gain strong traction in India and international markets such as Brazil, Argentina, Panama, Paraguay and Africa, particularly with maize as feedstock. India’s prospective 25% ethanol blending target will drive additional opportunities. Meanwhile, a strong pipeline continues to build in SAF, ETCA, CBG, services, and HiPurity solutions, with business expected to firm up in H2. Praj’s services business is also generating healthy enquiries in performance enhancers, O&M and biogenic CO2 capture. Going forward, execution pace will be a key monitorable. We remain positive on PRJ in the long run given 1) its leadership in domestic ethanol projects (50-55% market share), 2) healthy export outlook in Engineering driven by ETCA, 3) large pipeline in SAF in the US and domestic CBG, 4) focus on new technologies such as 2G ethanol and biopolymers, and 5) improving margins owing to growing share of exports & services.

Outlook

The stock is trading at a P/E of 40.8x/29.6x/22.3x on FY25/26/27E earnings. We maintain ‘Buy’ rating with an unchanged TP of Rs804, valuing the stock at a P/E of 34x FY26E (same as earlier).

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