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Systematix Research Report
Praj Industries Ltd.’s Q4 FY24 revenue grew marginally by 1% YoY and 23% QoQ to Rs 10.2 billion (in line with estimate). Bio energy slipped 3% YoY, Engineering grew by a meager 1% YoY and Hi-Purity segment reported a substantial jump of 44% YoY.
Domestic revenue fell 2% YoY to Rs 7.9 billion, as order execution and finalization slowed due to government of India’s recent policy flip-flop on ethanol. Export revenue surged 18% YoY to Rs 2.2 billion. Gross margin expanded 265 bps YoY and contracted 211 bps QoQ to 43.6% (estimate of 46%) on softening raw material prices and enhancement in export revenues and order mix. Ebitda margin expanded 198 bps YoY and 75 bps QoQ to 12.4% (estimate of 11.7%).
Ebitda increased 21% YoY and 31% QoQ to Rs 1.3 billion (8% higher than our estimate). PAT dipped 4% YoY to Rs 919 million (in line). Order intake during Q4 FY24 declined 11% YoY to Rs 9.2 billion, owing to 30% YoY drop in domestic orders, partly offset by 51% YoY surge in export orders.
Order backlog of Rs 38.6 billion grew at 13% YoY (down 2% QoQ) as of March 31, 2024. Despite government restrictions on sugarcane-based feedstock to produce ethanol (halted orders at the sugary feedstock plant), PRJ maintained robust order book, supported by healthy inquiries and growing traction for starchy feedstock plants, Compressed Biogas and Energy Transition and Climate Action segments.
Management has reaffirmed its three times revenue guidance by FY30. Its optimism stems from the huge expansion potential in bioenergy, CBG, ETCA, modularization, international services and Hi-Purity and likely restoration of Ethanol Blending Programme, all of which could translate into robust order book.
Margins may continue to improve on the back of benign raw material prices and rising exports. We have cut FY25E/FY26E revenue by 2.5%/1.0% to factor in the muted order intake but raised Ebitda margin by 50bps each and EPS by 3%/5% for FY25E/FY26E.
Reiterating Buy, with a revised target price of Rs 607 (Rs 578 earlier), based on 25 times FY26E P/E (unchanged).
Key risks: Change in GoI’s ethanol blending policy, inability to pass-through RM cost volatility, technology obsolescence, and supply-chain imbalance.
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