Prabhudas Lilladher's research report on Praj Industries
Praj Industries (PRAJ) reported a reasonable quarterly performance with revenue growth of 64.6% YoY. EBITDA margin were impacted during the quarter owing to higher contribution of domestic revenue, commodity inflation and supply chain issues.Though margins are likely to improve from H2FY23 with commodity softening, improving supply chain conditions and favorable business mix. Praj’s domestic market share has increased from 60% to 66% in 1G ethanol plant during the quarter, with increasing focus of customers on quality products. On exports front, healthy traction in order inflows is likely to be witnessed from H2FY23 onwards, led by increasing ethanol blending opportunities in geographies like Canada and Mexico, while CPES exports likely to be driven by modular process equipment in green hydrogen space. We believe PRAJ is well poised for growth in the coming years given 1) its strong leadership in domestic ethanol plants (~60-65% market share), 2) global presence (+100 countries) 3) focus on future-ready technologies like 2G plants, Compressed Bio Gas (CBG) and 4) diversification in Wastewater Treatment (ZLD), Critical Process Equipment’s & System (CPES) & HiPurity business. Factoring in lower margins in H1FY23 and revenue mix skid towards domestic market, we lower our FY23E EPS by 5.4%, but keep it unchanged for FY24E and FY25E.
Outlook
The stock is trading at 37x/25.7x/24.5x FY23/24/25E. We roll forward our TP to Sep’24E with revised TP of Rs520 (Rs507 earlier) valuing it at 30x Sep24EEPS and maintain ‘Buy’ rating.
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