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We revise our FY26/27E EPS estimates by -37.8%/-20.6% and downgrade the stock from ‘Buy’ to ‘Hold’ amid delayed order booking and execution due to tariff related uncertainties and liquidity challenges in domestic market. The company delivered a weak quarterly performance, with revenue declining 8.4% YoY and EBITDA margin contracting 685bps YoY to 5.6%, primarily due to execution delays. Tariff-related uncertainties affected order finalization, while funding constraints among customers halted dispatches in the domestic market straining working capital of the company and elongating the execution cycle. India’s achievement of the EBP20 target, coupled with uncertainty over the timeline for the new EBP mandate, is expected to limit near-term greenfield opportunities for Praj. Meanwhile, the company is exploring alternative uses and geographies for its GenX facility amid the uncertainty over tariff implications. Despite these near-term headwinds, Praj’s diversification into CBG, Bio Bitumen, biopolymers, and SAF is gaining traction, providing new avenues for growth.

Praj’s near-term prospects remain weak amid the continuing tariff related uncertainties, liquidity challenges in the domestic market and lack of visibility for greenfield 1G ethanol opportunities. However, its long-term growth may be aided by the prospective mandates for ethanol blending in petrol to 25%-30% and blending in diesel, along with co-product development opportunities with existing ethanol plants. The stock is trading at a P/E of 52.1x/30.6x on FY26/27E earnings. We value the stock at a PE of 29x Mar’27E (32x Mar’27E earlier) with a revised TP of Rs393 (Rs545 earlier).

Weaker execution in BioEnergy led to revenue decline: Consolidated revenue fell 18.2% YoY to Rs6.4bn (Ple: Rs7.8bn). Gross margin expanded by 65bps YoY to 53.4% (PLe: 47.3%). EBITDA declined 59.0% YoY to Rs356mn (Ple: Rs673mn) while EBITDA margin contracted by 685bps YoY to 5.6% (PLe: 8.6%) due to higher employee costs (+5.5% YoY) and higher other expenses (+9.8% YoY). PBT (ex. Extra-ordinaries) declined 87.8% YoY to Rs96mn (PLe: Rs575mn). Adj. PAT declined 91.4% YoY to Rs53mn (PLe: Rs431mn) as weaker operating performance was further impacted by lower other income (-74.4% YoY) and higher depreciation (+25% YoY).

Decision making delays led to lower order intake in Engineering and HiPurity: Q1 order inflow fell by by 10.5% YoY to Rs8.0bn primarily due to lower order intake in Engineering segment (-71.7% YoY vs higher base) and HiPurity (-28.4% YoY) partially offset by Bio Energy (+37.7% YoY). Domestic/export inflow mix stood at 55%/45% (vs 58%/42% in Q1FY25). Order book stood at Rs44.5bn (1.4x TTM revenue) – 81%/4%/15% in BioEnergy/HiPurity/Engineering and 62%/38% in domestic/exports.

Conference Call Highlights

• 1G Domestic: India’s EBP20 target has been achieved, and the installed capacity exceeds the EBP20 requirement which led to slowdown in greenfield ethanol plants. Meanwhile, the funding challenges for the customers continue leading to elongation of the execution cycle and some strain on Praj’s working capital due to accumulation of inventory and receivables. Different states of India are now encouraging bioenergy transition with better investments and policy support which is anticipated to support Praj’s domestic Bioenergy business.
• 1G International: Decision making delays due to tariff related uncertainties has resulted in the lower order booking despite a healthy enquiry basket. IRA Approval of 45Z/ 45Q with clarity and extension through 2029 presents a strong short to mid-term opportunity to promote ATCS, CO2 solutions in the USA market while company is witnessing good traction from Latin America due to favorable policy landscape such as increase in ethanol blending mandate in the countries like Brazil. Furthermore, the Latin American countries also export Ethanol to USA, and these countries have lower tariff which may further develop incremental opportunity for Praj’s 1G International business.
• 2G Ethanol: Praj’s first ever 2G Ethanol plant is progressing in line with management’s expectation. The management expects to commercialize its first 2G plant by the end of FY26 followed by few more 2G plants in the pipeline.
• GenX facility: Tariff related uncertainty and reduced prioritization of energy transition has led to ordering slowdown. This tariff related uncertainty has led to management exploring alternative uses for the facility into non-ETCA industries. During the quarter, management added 2 more framework agreements along with having ~Rs10bn worth of proposals/prospects on hand where decision making is pending.
• SAF: Company received an order for detailed engineering of a commercial size SAF plant in the USA which will help Praj to develop its capabilities in the ethanol-to-jet path. Furthermore, various states in India are promoting SAF with various supporting policies are expected to be announced soon.
• CBG: Company is witnessing good traction for Napier Grass and press mudbased plants. However, the ordering is getting delayed due to delayed funding finalization. Company successfully completed 3 CBG projects and is witnessing more enquiries in different feedstocks including Napier Grass. Company is currently in discussion with multiple customers regarding addition of Bio Bitumen as a byproduct as it can be blended to up to 10% in fossilbased bitumen.

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