BackPraj Industries in a sweet spot on rising consumption of ethanol
The company’s sales grew more than 90% year-on-year and ethanol revenue increased by 112.7% y-o-y to Rs397 crore in the March quarter
PremiumPraj Industries Ltd continues seeing regular gains on the bourses. The stock has returned almost 275% in the current year-to-date.
Praj remains a well-known company engaged in the domestic distillery and brewery installation business. The company continues gaining prominence with government focus on increasing ethanol production. As the same is necessary to reduce the sugar glut, the increased usage of biofuels can reduce the dependence of the country on imports. Thus Praj, with its leadership in biofuel technology and with its continuously improving order pipeline, remains in a sweet spot, say analysts.
The company’s Q4 performance holds testimony. Its sales grew more than 90% year-on-year (up about 18,4% sequentially). Ethanol (bioenergy) revenue that contributes about 70% to overall increased by 112.7% y-o-y to ₹397 Crore. Engineering business (including brewery) grew by 40.4% y-o-y.
The operating performance, too, remained strong. Earnings before interest, tax, depreciation, and amortization more than doubled over the year-ago quarter; it was up 44% sequentially.
Additionally, order flow remains impressive. The order intake during FY21 stood at ₹1,970 crore (26% from export and 74% from domestic). Analysts at Anand Rathi Securities said that this shows strong revenue build-up in the near term. Additionally, the recent government initiative will benefit the bioenergy segment of Praj industries and is expected to gradually improve its order inflows, they add.
Praj will continue to get benefit from the upcoming opportunities in biomobility as well as in the bio-CNG. Analysts at Phillip Capital Institutional equity Research say that the company offers a perfect blend for a circular bio-economy. Praj, with its leadership in biofuel technology, will benefit from upcoming opportunities in biomobility, bio-CNG, and RCM with the global push for the sustainable environment, they add. Management is expecting significant traction in the development of bio-CNG projects supported under Sustainable Alternative towards Affordable Transportation (SATAT).
Not surprising, the stock scaled fresh highs on Tuesday and is trading at 25 times FY23 estimates.
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