Why Praj Industries Share Price is Rising

We're in for a busy week ahead as Adani group stocks remain in limelight.

Results wise, it's going to be a light week as major players have declared their earnings for the second quarter of FY25. The economic calendar is also light, and Indian share markets will digest a post-election rally.

However, one particular event has stood out - a press conference from one of the top ethanol companies in India.

Praj Industries, a pioneer and leading player in biotechnology and solutions for biomobility, is finally getting its due. The company's management recently highlighted their plans to triple revenues by 2030.

Reacting to the above, the stock price soared around 19% on a single day last week. This was followed by 3% gains today.

Let's take a deep dive analysis into the company's strong growth plans and what investors could expect.

Why Praj Industries Share is Rising

# Three-Fold Revenue Growth Target!

The recent rally in Praj Industries comes after the ethanol company said that it is expecting to triple its revenues by 2030.

In FY24, Praj reported a revenue of Rs 34 bn. By 2030, the company has strong growth plans in place to take the revenue figure up to Rs 100 bn.

Here's a table that shows Praj's financials between 2020-2024:

Financial Snapshot of Praj Industries (FY20-FY24)

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	11,062	13,126	22,228	35,818	33,914
Growth (%)	3%	19%	69%	61%	-5%
Operating Profit	1,081	1,381	2,300	3,536	4,313
OPM (%)	10%	11%	10%	10%	13%
Net Profit	704	810	1,502	2,398	2,834
Net Margin (%)	6%	6%	7%	7%	8%
ROE (%)	9.7	10.7	17.5	24.1	24.1
ROCE (%)	11.8	15.3	24.2	32.4	32.9
Dividend (Rs)	2.7	2.2	4.2	4.5	6.0
Debt to Equity (x)	0.0	0.0	0.0	0.0	0.0

Source: Equitymaster

In a press conference, the company said that it is eying opportunities in multiple sectors including sustainable aviation fuel (SAF), biopolymers and the energy transition & climate actions (ETCA).

The company's founder Pramod Chaudhari said that the transition in energy sectors could push energy majors to invest massive amount in the clean energy sector. This will in turn create demand for modularisation solutions.

To cater to this demand, Praj Industries has developed strong engineering capabilities in modularisation and has set up a dedicated advanced manufacturing facility at Mangalore in Karnataka.

This plant could deliver revenues in the range of Rs 20-25 bn annually at the optimum level, according to the founder.

Meanwhile, the company's president of technology said that India's first commercial passenger flight powered by indigenously produced SAF from sugarcane molasses was successfully flown from Pune to New Delhi.

This was done after Air Asia, Praj Industries and IOC came together to make this successful.

Currently, Praj's share of exports comes to 29%. Going forward, the company is looking at taking this share to 50%.

Note that Praj Industries stands as a multinational corporation at the forefront of ethanol and brewery industry solutions.

The company has successfully produced the first batch of Lactic Acid 90%, a key component for bioplastic, at its plant for BioPolymers in Jejuri near Pune.

The company has also established a Centre of Excellence & Innovation (CoEI) in collaboration with the Vasantdada Sugar Institute to integrate a "Farm to Fuel" model with the development of alternate feedstock.

Despite the robust growth in the business, the company has no debt on its books, which is highly commendable.

Praj Industries, with its strong market dominance, diversified portfolio and strong financials, presents a compelling opportunity to tap into the renewable energy sectors.

What Next?

A pure play to the surging demand for ethanol in the coming years, Praj Industries has evolved from an ethanol plant supplier to a global powerhouse. It enjoys a first-mover advantage, being in the business for decades and commands over two-thirds of the market share.

For the second quarter of FY25, Praj reported a 7.5% decrease in sales to Rs 8.2 bn. This was due to the slower pace of execution in the bioenergy segment.

Segment wise, bioenergy contributed 69%, while engineering and Hipurity accounted for 24% and 8%, respectively.

Of the total revenue generated, 73% came from the domestic market, while the remaining 27% was from exports.

Its net profit declined by 13.7% YoY to Rs 583.3 million (m), and the net profit margin for the quarter was 6.6%, compared to 7.1% in the same period a year ago.

During the quarter, the company's order intake was Rs 9.2 bn, with 94% of these orders originating from the domestic market, primarily in the bioenergy sector.

At the end of the quarter, the order backlog stood at Rs 41.5 bn.

Praj is witnessing strong demand for corn ethanol in Brazil, Argentina, and Paraguay, driven by new ethanol blending mandates in Brazil.

In parallel, the company's service business is experiencing significant growth, with the order book for H1FY25 already 40% higher than the total for FY24.

Additionally, there is increasing interest in biogenic CO2 capture and fermentation process management.

On the engineering side, progress at the Mangalore facility remains on schedule, with approvals secured from four major EPC companies.

Praj's inquiry pipeline is strong, with sustained demand for ethanol. In H1FY25, R&D expenses were at Rs 150 m, and capital expenditure is expected to reach Rs 650-700 m for the year.

Praj is currently expanding its service portfolio and developing co-products, including a demonstration plant for corn oil. The management is confident of doubling revenue over the next three years, driven by strong demand, strategic initiatives, and a focus on cellulosic feedstocks and sustainability.

Praj also has a positive outlook for its water treatment business with increasing demand for sustainable solutions. It is actively participating in addressing water treatment needs aligning with NITI Aayog's vision for waterless cities by 2030.

The company's management also believes the hydrogen industry presents opportunities for emission reduction and future fuel applications.

However, investors must remain prudent. The renewable energy sector is evolving rapidly, with the competition increasing from every aspect.

Presently, Praj Industries share price is trading at a Price-to-Earnings (PE) ratio of 48 times, a little higher compared to its 5-year historical median PE of 41x.

Here's a table comparing Praj with its peers -

Comparative Analysis

Company	Praj Ind	GMM Pfaudler	Kirloskar Brothers	Shriram Pistons	Skipper
ROE (%)	24.1	19.8	21.8	25.6	9.8
ROCE (%)	32.9	21.4	28.7	29.6	20.8
Latest EPS (Rs)	16.3	23.4	49.7	106.1	9.8
TTM PE (x)	47.8	51.4	43.8	18.8	54.1
TTM Price to book (x)	11.1	5.3	9.3	4.1	6.3
Dividend yield (%)	0.8	0.2	0.3	0.5	0.0
Industry PE	55.5
Industry PB	6.8

Source: Equitymaster, Ace Equity

How Praj Industries Share Price has Performed Recently

In the past 5 days, Praj Industries share price has gained 11%.

In 2024 so far, the stock is up 43%.

Praj Industries has a 52-week high of Rs 827 touched on 30 September 2024 and a 52-week low of Rs 448 touched on 15 March 2024.

In the past 1 year, shares are up 28%.

About Praj Industries

Praj Industries designs, manufactures and supplies fermentation and distillation equipment for manufacturing ethanol.

It is actively engaged in ethanol production, employing both the traditional first-generation method using sugary feedstock and the innovative 'second-generation' approach utilising starchy feedstock.

The company's engineering segment has many facets. Under this segment, it manufactures critical process equipment & skids for various process plant projects, catering largely to the oil & gas and fertilizers sector.

This segment also caters to the new generation energy transition and climate action sectors such as blue and green hydrogen, carbon capture, waste-to-energy and low carbon fuels etc.

Apart from this, the company offers a comprehensive range of solutions for industrial effluent treatment, recycling and zero liquid discharge (ZLD) systems to customers across several sectors namely metals, power, specialty chemicals, fertilizers, refinery & petrochemicals, F&B, etc.

Praj Industries stronghold extends to the brewing & beverage industry, commanding a leading market share and collaborating with major global beer manufacturers.

For more details, check out Praj Industries financial factsheet.

You can also check out the below video where Richa Agarwal gives a bird's eye view on the company.

Happy Investing!

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