Debt-Free Stock With High P/E & ROE Is Axis Securities Pick of The Week For Rs 565 TP; Do You Own?

Brewery & Beverages, ALD Systems, CPE & Modularization, Biofuels, Biomaterials, Energy Transition & Climate Action, High Purity Water Systems, and CPE are just a few of the industries in which Praj Industries Ltd. (Praj) provides engineering solutions. Its bioenergy solutions include CBG Solution and 1G and 2G ethanol. Praj offers SAF manufacturing technology solutions globally through its BioMobility platform. In order to produce 1G ethanol, the corporation is also growing its worldwide footprint in the USA and Brazil. The engineering division of Praj addresses the rising demand for renewable energy solutions. The debt-free company Praj Industries has been selected as a pick of the week by Axis Securities for a target price of Rs 565 indicating a potential upside of 11% from the current market price of the stock.

Reasons To Buy The Shares of Praj Industries According To Axis Securities

The government is considering re-allowing sugar to produce ethanol: Due to recent policy changes, particularly the government's restrictions on the use of sugar for ethanol production, there was a challenging quarter for the company, characterized by a lack of orders or execution from sugar-based ethanol plants. However, there is a potential turnaround on the horizon, as the government is considering permitting sugar mills to utilize their B-heavy molasses for ethanol manufacturing once again, especially with the unexpected increase in sugar production.

Mandatory CBG blending with CNG: In her Interim Budget, the Finance Minister emphasized leveraging captive resources in the energy mix, aligning with the Government's vision of achieving energy independence by 2047. One of the key announcements was the mandatory mixing of CBG with CNG and PNG, aimed at promoting the bioenergy sector. Other initiatives included mandatory blending of biogas, financial assistance for the procurement of biomass aggregation machinery, and the introduction of a scheme for the bio-manufacturing sector. This scheme aims to provide environmentally friendly alternatives such as biodegradable polymers and bioplastics.

Growth Across Multiple Segments: Demand for Sustainable Aviation Fuel (SAF) is anticipated to gain momentum from June 2024, particularly as the USA gains clarity on the 45Z Interest Reduction Act. Furthermore, there is expected to be increased execution in the Energy Transition & Climate Action (ETCA) segment, notably following the commissioning of the Mangalore facility. Additionally, robust progress in Zero Liquid Discharge (ZLD) and Chemical Handling Systems (CHS) verticals is anticipated. The utilization of High-Purity water in battery chemicals and semiconductor chips is poised to drive growth in the PHS segment.

Praj Industries Share Price Target

"While encountering some short-term obstacles, we maintain a positive outlook on Praj Industries' long-term growth potential. Positioned as a premier pure-play investment in carbon neutrality and sustainable growth, Praj Industries stands out amidst escalating global commitments and interest in decarbonization. This burgeoning trend reinforces our confidence in the company's long-term growth trajectory, with near-term tailwinds bolstering earnings momentum. Additionally, the company trades at a reasonable valuation, currently standing at 33x TTM PE and 24x FY25E, further underscoring its investment appeal. We recommend a BUY rating on the stock with the target price of Rs 565/share, implying an upside of 11% from the CMP," said Axis Securities in a note.

Praj Industries Share Price History

In the last 1 year, the stock has gained 45.68% and on a YTD basis, the scrip has fallen 8% so far in 2024. The stock touched a 52-week-high of Rs 650.30 on (30/11/2023) and a 52-week-low of Rs 340.00 on (27/04/2023). Praj Industries is among the few debt-free companies with a good P/E ratio of 33.62, lower than its sector PE ratio of 61.95 and healthy ROE of 22.24%, as per the data of Trendlyne.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.