Praj Industries Q3 Results Review - Robust Opportunities Across The Bio-Economy: Prabhudas Lilladher

Prabhudas Lilladher Report

We revise our FY24/25/26E earning per share estimates by -5.2%/+2.1%/+ 9.2% factoring in lower execution this year followed by strong pipeline of opportunities across segments going forward and upgrade to ‘Buy’ rating from 'Accumulate' with a revised target price of Rs 647 (Rs 611 earlier).

Praj Industries Ltd.’s reported mixed quarterly performance with revenue declining 9.1% YoY, while Ebitda margin expanded by 220 basis points YoY to 11.6%. Restriction on use of sugar syrup in ethanol production delayed execution (syrup-based contracts account for Rs 2.5 billion in the order book); however, we believe this is likely a temporary phenomenon.

The company is aiming for three times revenue growth by 2030 driven by significant opportunities in exports (energy transition and climate action across the globe, low-carbon ethanol for SAF in U.S., etc.), ~Rs 370 billion investment pipeline in CBG, and alternative feedstock in 1G and 2G ethanol.

The stock is trading at a price/earning of 25.0 times/19.9 times FY25/26E. We roll-forward to December- 25, valuing the stock at a P/E of 28 times December- 25E (30 times September- 25E earlier). Upgrade to ‘Buy’.

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