|Recommendation||PRICE RANGE||Target Price||Time Horizon|
|Accumulate||₹ 340 – ₹350||Rs. 420||12 Months|
Praj Industries is one of the most reputed & technologically advanced biotech & engineering companies in India. Co has more than 1000 customer present in 100+ countries across. They are into three business segment Bioenergy (77%), Engineering (15%), HI Purity (9%). Around 83% of the revenue come from India and 17% from Export. As on Q3FY22 Praj has an order book of 2605 Crore of which 66% is from Bioenergy segment.
Key Investment Rationale
•Praj has developed advanced bio methanation technology based on proprietary microbiological pre-treatment for production of compressed biogas, they commercialized a proprietary renewable gas technology – RenGasTM &has commissioned over 40 plants in India. The process creates value-added manure with organic soil as a byproduct while advanced biogas cleaning techniques gives pure methane. As world is moving to clean energy this technology will gather more pace.
• Marine Biofuel – Marine biofuels produced from certified lignin-based feedstocks are rapidly gaining interest among international ocean shippers and carriers.
• In 2021 India has achieved highest ever Ethanol blend of 8.1% with around 90% of Ethanol supplied from Sugary feedstock, the government has hiked the price of ethanol extracted from sugarcane for by up to Rs 1.47 per litre for 2021-22. Which will also utilize excess sugar in the country On International front company is seeing good momentum in capacity building in North and South America.
• Bio Syrup is witnessing good response on initial levels in Brazil. Praj’s commercial demo facility for production of Ethanol from BIOSYRUP has been successfully implemented in M/s Jaywant Sugars. BIOSYRUP was stored for the period of one year and no sugar loss was observed even after the period of 12 months. The technology has been validated and certified Vasantdada Sugar Institute (VSI) – India’s premier sugar research institution.
• Continued Strong Demand for Domestic Grain based 1G Ethanol plants: During Q2 FY22 ~118 Cr Liters of capacity was ordered built in the country of which ~94 cr liters was for Grain based capacity(starchy feedstock) indicating momentum in Grain based distilleries, this will ensure wide spread of Ethanol across country and help in achieving EBP targets. During the Q3 quarter company received orders worth 433 Cr from grain based distilleries.
• Praj Reported very strong Revenue growth of 68% YoY in Q3FY22, EBITDA was up 28% , EBITDA Margin was impacted by high material cost which came in at 8.71%.PAT was up 31.6% at ₹37.1 crore.
• Praj has a very strong order book of ₹ 2605 Cr, out of which 956 cr order came in Q3FY22, of the total order 78% is from domestic sector and 22% is from Export market. Execution is improving for the company
Praj is witnessing strong growth in its key segment Bio Energy in Domestic business, as government is pushing for ethanol blending from 10% to 20% in FY25, and Praj being a key player in Ethanol plant is going to be a beneficiary, the overall demand-supply gap of Ethanol, increased interest in grain based distilleries and decarbonisation impetus is auguring well for Praj along with development in other key verticals such as Biosyrups, High Purity gaining traction. Praj is a key beneficiary of multiple tailwinds from ethanol bleeding to bio energy. We expect a robust Revenue growth of 25% in Q4FY22 but margins are expected to fall due to high material cost, profit is expected to degrow 9% in this quarter, but seeing the long term growth visibility we recommend ACCUMULATE IN THE PRICE RANGE OF ₹340-355 on the company, valuing the company on 40x FY23 earning we recommend BUY for the target price of ₹420.
|Profit And Loss||Yearly||Quarter||Quarter||Quarter||Quarter|
|Power & Fuel Cost||10||4||3||2||2|
|Other Manufacturing Expenses||245||90||63||51||42|
|Selling and Administration Expenses||132||49||33||28||22|
|Profit After Tax||133||41||37||33||22|
|Total Non-Current Assets||381||358||382||386|
|Other current Assets||287||257||169||200|
|Reserve & Surplus||858||765||683||708|
|Total Non-current liabilities||28||27||32||16|
|Other Current liabilities||460||423||222||251|
|Total Current Liabilities||1851||1594||1162||1247|
|Cash Flow Statement||2022E||2021||2020||2019|
|Net Profit Before Tax||179||113||83||88|
|Working Capital Change||(158)||116||(76)||(37)|
|Cash Flow From Operating Activity||3||236||15||54|
|Cash Flow From Investing Activity||2||(164)||62||(3)|
|Cash Flow From Financing Activity||(40)||(6)||(98)||(43)|
|Change in Cash||(34)||66||(21)||7|
|I. Solvency Ratios||2022E||2021||2020||2019|
|II. Turnover Ratios||2022||2021||2020||2019|
|Average Receivables collection period||75.9 Days||109.6 Days||105.2 Days||97.7 Days|
|Average Payable Days (payment period)||87.6 Days||131.1 Days||134.4 Days||141.0 Days|
|Inventories Days||39.1 Days||59.5 Days||75.6 Days||76.0 Days|
|Cash Collection Cycle||27.4 Days||38.0 Days||46.4 Days||32.6 Days|
|III. Operating Efficiency||2022||2021||2020||2019|
|Total asset turnover (Sales / Average Assets)||1.29||0.95||0.92||1.83|
|Net fixed asset turnover||8.11||4.83||3.94||4.13|
|IV. Return Ratio||2022||2021||2020||2019|
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