Praj Industries - Buy on declines

 Company Background

*Praj Industries Outlines Its ‘String Of Pearls’ Strategy*

Praj Industries Ltd. targets to be a “string of pearls” company with multiple segments driving its earnings.

From ethanol and bioenergy to wastewater treatment, the company sees all its businesses contributing, Shishir Joshipura, managing director and chief executive officer at Praj Industries, said in an interview with BloombergQuint’s Niraj Shah.

*Ethanol*

India’s E20 plan envisaging 20% blending of ethanol by 2025 in petrol is also now the company’s core programme, Joshipura said. Additional orders that need to be put out for machinery would total up to roughly Rs 14,000 crore by then, he said.

Praj Industries will be able to maintain about two-thirds of its market share in the business, according to Joshipura. Investments in technology over the years will help the company keep its edge and the company would be able to bag at least two-thirds of the orders, he said.

If blending in diesel starts as well, it will be an added opportunity for Praj Industries and other companies in this segment.

*Biogas*

India plans to increase the share of gas in the nation’s fuel mix. Under the government’s Sustainable Alternative Towards Affordable Transportation programme, India seeks to set up 5,000 plants generating biogas of stricter specifications than CNG, he said.

*Wastewater*

Zero liquid discharge is becoming an important aspect of wastewater disposal and Praj Industries’ role is well established, Joshipura said.

“I am not aware of any other water treatment company in India, which has its core strength in microbiology like Praj,” he said.

Kotak Securities estimates that Praj Industry can double its revenues and treble its profits by FY23. In FY21, the company clocked a revenue of Rs 1,305 crore and a net profit of Rs 81 crore.

The stock has already surpassed Kotak's 12-month price target of Rs 315 and Phillip Capital's Rs 320 apiece. Shares of Praj Industries have surged 175% so far this year. The benchmark Nifty 50 is up about 9% year to date.

Our Recommendation -

The scrip ran up 300% or 3x last 6 months and is likely to correct unless follow up buying emerges in a big way. Avail dips to add to your portfolio as the business outlook is robust and company has excellent product pipeline.