Praj Industries Q3 Results Review - Margin Improvement To Continue; New Growth Areas Hold Key: Systematix

Systematix Research Report

Praj Industries Ltd.’s Q3 FY24 revenue slipped 9% YoY and 6% QoQ to Rs 8.3 billion (21% below estimate of Rs 10.5 billion). Bio energy and hi-purity segments de-grew by 12%/9% YoY, respectively, while the engineering segment reported flat revenue of Rs 1.7 billion.

Domestic revenue dropped 13.5% YoY due to the government’s recent policy flip flop, restricting the diversion of sugar towards ethanol. This resulted in an unusual quarter, with no order finalisation for sugar-based ethanol plants. However, Praj Industries attracted a steady flow of starchy feedstock-based inquiries that translated into orders.

Gross margin expanded 700 basis points YoY and 229 bps QoQ to a healthy 45.7%, higher than our estimate of 43.5%, owing to softening raw material prices. Ebitda margin expanded 220 bps YoY and 282 bps QoQ to 11.6% (estimate of 10%) due to better sales mix, higher exports, increasing service orders and soft raw material prices.

Ebitda increased 12% YoY and 24% QoQ to Rs 965 million (8% lower than our estimate). Interest expenses tripled to Rs 38 million, with depreciation increasing 50% YoY to Rs 109 million.

Other income grew 17% YoY to Rs 91 million. Adjusted profit after tax increased 13% YoY to Rs 704 million but was 10% below our estimate. Order intake during Q3 FY24 grew by 9.9% YoY to Rs 10.4 billion, with 13.8% YoY growth in domestic orders, partly offset by 9.5% YoY fall in export orders.

Order backlog at Rs 39.5 billion grew 17% YoY (flat QoQ) as of December 31, 2023. Management is optimistic on tripling revenue by FY30, expected to be fueled by government initiatives in the new growth areas of bioenergy, energy transition climate action services, PHS, sustainable aviation fuel, and global CBG segments.

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