Stock Of Ethanol Plants Player Can Jump 61%, Set To Ride Bio-economic Revolution

Broking firm, Axis Securities in its latest report of March in its stock pick has highlighted supplier/constructor of ethanol plants, Praj Industries as a key beneficiary of the Bio-economic revolution. Praj a global company provides various engineering solutions with a focus on the environment, energy, and agri-process industry.

According to Axis Securities Praj has a presence across the globe with more than 750 references in more than 75 countries. It is the Indian market leader in the Ethanol Plant market and among the top ZLD players in the country.

But the stock of Praj for a 61% upside, says Axis Securities

Axis Securities has set a price target of Rs 550 on the stock of Praj Industries, against the current market price of Rs 344, implying a healthy upisde of nearly 61%.

According to Axis Securities, Bioenergy in Domestic business, the overall demand-supply gap of Ethanol, increased interest in grain-based distilleries and decarbonization impetus is auguring well for Praj along with development in other key verticals such as CPS, ZLD & High Purity gaining traction. "Praj is a key beneficiary of multiple tailwinds provided by the bio-economic revolution, giving strong growth &revenue visibility for the next 3-5 years. The company's key growth levers remain strong & therefore we maintain our BUY rating with a Target Price of Rs 550 valuing the company at 35x FY24E," the brokerage said.

Strong traction in ethanol business

According to Axis Securities, during Q3 FY23, ethanol capacity creation continued momentum. Company has also seen traction gaining in Engineering segment with focus CPES business catering to Green Hydrogen Sector which has growing interest across the globe. Company also got its first semiconductor order which is another booming industry, thus Praj is supported from multiple levers.

The company is witnessing more growth in Grainbased distilleries which has reduced the seasonality of the business which was predominantly based on the sugar cycle. This has led to year-round utilisation of assets resulting in an improved asset turnover ratio from 0.98 to 1.23 in FY22. This has also led to less strain on the supply chain and improved order execution rate.