Hold Praj Industries Ltd For Target Rs. 500 - Axis Securities Ltd
Est. Vs. Actual for Q4FY25: Revenue: MISS; EBITDA: MISS; PAT: MISS
Changes in Estimates post Q4FY25
FY26E/FY27E: Revenue: -13%/-7%; EBITDA: -14%/-5%; PAT: -18%/-10%
Recommendation Rationale
Extended project execution cycle: Praj’s Engineering division reported a 16% YoY decline in revenue for the quarter, contributing to an overall YoY revenue drop. The slowdown in order execution was attributed to several factors, including delays in commissioning the GenX facility, stretched project execution timelines, and tighter liquidity norms at the customer’s end.
Focus shifting to newer avenues: Management noted that the business is currently undergoing a transition phase, which is impacting the current performance. The management also acknowledged that the global bioeconomy and transition space is evolving, with growth expected to come from newer offerings as well as the augmentation of past offerings. The company is seeing strong traction in the CBG and services businesses.
Challenges may persist in the near term : In addition to slower project execution, profitability was impacted by initial costs associated with the new GenX plant. While there is strong traction in order finalisation, the GenX facility is expected to begin contributing meaningfully to consolidated revenue and PBT towards the end of FY26. Similarly, the orders received towards the end of FY25 may take 12-18 months to reflect on revenue, with performance expected to remain subdued over the next few quarters.
Growth visibility beyond FY26: Management mentioned that the company is focusing on growing other areas beyond Ethanol. There is a strong enquiry pipeline, and the company remains focused on its 2030 revenue target. While the GenX facility is currently having a drag of around Rs 75-80 Cr on profitability, it is expected to reach breakeven by FY27.
Sector Outlook: Cautiously Optimistic
Company Outlook & Guidance: The company believes that long-term growth levers remain intact, driven by substantial interest in its newer offerings. However, delays in execution may defer both revenue growth and margin expansion. Praj continues to focus on reducing its dependence on the sugar-based ethanol business, while leveraging its strong R&D capabilities and geographic presence to enhance both product and geographic mix. Overall, the company remains confident in meeting its broader guidance of tripling revenue by 2030, along with a steady improvement in margins.
Valuation : 20x FY27E; ( Earlier: 25x FY27E)
Current TP: Rs. 500/share; ( Earlier TP: Rs 690/share)
Recommendation: We maintain our HOLD rating on the stock
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SEBI Registration number is INZ000161633
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