Bioenergy, exports to drive Praj Industries’s earnings growth | Mint

Bioenergy, exports to drive Praj Industries's earnings growth

Pramod Chaudhari, chairman, Praj Industries Limited
Pramod Chaudhari, chairman, Praj Industries Limited

Summary

  • Bioenergy contributed 79% of its revenue in the first half of FY24.

Praj Industries Ltd’s investors find themselves in a sweet spot. After all, the shares have jumped by almost 67% in the past six months. The company aims to triple its revenue by FY30, it said in a recent analysts meeting.

The management also cited its two-pronged strategy to focus on bio-mobility (decarbonizing the transportation industry through advanced, next generation, and conventional biofuels) and bio-prism (technologies for production of renewable chemicals and materials).

Praj Industries’s bioenergy segment is seen as driving future growth. It provides technology and equipment to ethanol plants and houses technology for the production of compressed biofuels (CBG) and future fuels such as sustainable aviation fuel (SAF). The segment contributed 79% of revenue in the first half of FY24.

The recent government directive mandating the blending of CBG with CNG for transportation and PNG for domestic use within the city gas distribution sector is expected to be a big catalyst for growth. The management is confident that this will accelerate the pace of order awards in the CBG business. Along with CBG, the SAF business is also expected to be a key driver in achieving the FY30 revenue target.

Strategic partnerships with Gevo, Axens, and Indian Oil Corp. Ltd are expected to enhance opportunities in the SAF space. Moreover, as India joins the Carbon Offsetting and Reduction Scheme for International Aviation, mandatory SAF blending from 2027 could create significant opportunities.

“The company has multiple high-growth opportunities across its various segments in the near to medium term, CBG & Ethanol Gen 1 exports have started seeing traction and engineering has shown strong traction in FY24," said Prathamesh Sawant, an analyst at Axis Securities. He also highlighted that in the bioenergy and engineering businesses, exports will enjoy higher margins compared to domestic business. Revenue from the engineering business in H1 was 15%.

The company aims for a 50:50 split in order book for domestic and international (exports) orders. In FY23, 82% were domestic orders and the rest came from overseas.

Meanwhile, after the sharp rally, the stock now trades at 33 times estimated earnings for FY25, showed Bloomberg data. As such, further re-ratings may be capped. Revenue prospects appear bright to say the least. As Amit Anwani, analyst at Prabhudas Lilladher pointed out, monitoring government tenders for CBG is crucial, as a slow pace of expected export ordering could derail growth momentum. Investors should also track order inflows from the US as the focus in international markets remains on the US and Europe, he added.

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