Mutual funds are buying this stock | Expert stock analysis - Shailesh Kanani, Centrum Broking
Published: 2024-10-06
Status:
Available
|
Analyzed
Published: 2024-10-06
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
Ethanol blending in diesel is expected to create new opportunities for Praj within the next two to three years.
"the idea is that we increase the ethanol blending in other products as well other molecules as well like in diesel end which is say in next two to three years so that will create another set of opportunities for PR"
Pending
Praj has dominance in the 2G ethanol space with two out of four existing plants under construction.
"however if you see numbers there around four ethanol 2G plants in India and out of that complete and two are under construction"
Pending
2G ethanol plants are expected to become a trend within three to five years, but challenges related to their higher cost compared to 1G plants need to be addressed.
"and to your question whether this will become a trend going ahead uh it will become but as I said it will take three to five years there are certain parts which needs to be addressed when 2G EOL plants are far more expensive than a 1 G ethanol plant"
Pending
Praj experienced a 77% increase in international order inflow in FY24 over the preceding 12-15 months.
"in last 12 to 15 months the performance on the International order booking has improved a lot so if I give you some numbers in fi 24 they have seen a jump of around 77% in order inflow on the international front"
Pending
Praj aims for a 50/50 revenue split between domestic and international markets within the next three to five years.
"management has guided that going ahead in the next 3 to 5 years they want to uh have a 50/50 Revenue split between domestic as well as exports"
Pending
The Mang Fac facility, catering to the oil and gas segment, is expected to become operational in the second half of the year and generate significant revenue.
"mang fac which is cering to oil and gas segment which they believe will generate good amount of Revenue in times to come that facility is expected to get operational by second half"
Pending
Praj is seeing strong traction in the Brazil market, evidenced by a significant increase in ethanol order size from 60 KPD to 660 KPD in FY24, with an encouraging order pipeline.
"they are seeing very good traction from the Brazil segment annual report22 small order on ethanol front of 60 KPD now that order has led that execution is completed and in fi 24 annual report they have re they have achieved received an order of around 660 KPD which is a big order and increment the order pipeline in brail will be encouraging"
Pending
Praj targets achieving a 50/50 domestic-international revenue split by FY30, requiring approximately five to six years.
"I think they would need at least five six years f530 is where I think they are targeting they're targeting sure"
Pending
Praj aims to reach approximately 9,000 to 10,000 crores in revenue by 2030.
"their are Target is to reach say around 9 to 10,000 by 2030"
Pending
The Indian government targets achieving 20% ethanol blending by 2025-2026.
"the government has targeted the 26 that if I'm not wrong 2025 2026 that 20% ethanol blending should be uh complete"
Pending
Achieving the 10,000 crore revenue target will likely take more time than initially suggested, implying it might not be fully realized by 2026.
"we think up to 10,000 CR Target AI 2026 is that so yeah it will take a larger amount of time to achieve the 10,000 CR Mark Target"
Pending
Praj is a leading Indian company in compressed biogas (CBG) with operational plants using multiple feedstocks.
"CBG upcoming opportunity CBG is basically compressed biogas which again prag is one of the only Indian companies which have commercial operational plant on three different feed stocks namely prud spint wash and R straw plants"
Pending
Blending 5% ethanol in diesel could create an opportunity equivalent to 15% ethanol blending in petrol, given the higher diesel consumption.
"the second leg of ethanol expansion production this facility expansion that would be say blending in diesel which we highlighted which we touched upon in our earlier conversation right that can be incremental opportunity diesel consumption Visa petrol consumption we consume around 2.5 to 3x of the petrol consumption that is diesel consumption is that higher so even if we're talking about 5% blending in diesel that itself would created an opportunity which is nearly E15 in terms of petrol"
Pending
Commercializing ethanol blending in diesel is still a work in progress and faces challenges, making it a 'maybe' scenario for achieving targets.
"ethanol blending with diesel is not that easy it is kind of work in progress currently because the way ethanol is homogeneous with petrol easily but if it fructifies then maybe they kind of achieve their target before it but it is a maybe currently"
Pending
Praj is addressing the challenge of feedstock availability for CBG by exploring new sources like Napier grass.
"predominantly couple of challenges for CBG is avability of fed stock what company is doing to navigate that is they are kind of building upon adding new Fe stocks again fi 24n report there they have mentioned that Napier grass is again one fed stock which they are working on and they are confident that that can be used as a feed stock uh for CBG production"
Pending
An estimated capex of 37,500 crore is needed for the approximately 750 CBG plants required to achieve 5% blending by 2029.
"the incremental 750 PL uh we would need a capex of around 37,500 crores in next say four to five years"
Pending
While not as dominant as in ethanol, Praj is expected to be a top-tier player in CBG technology and solutions.
"Praj would not be as dominant player in CBG as similar to ethanol where they have a market share of 50 60% but at least it will be a top cortile player in terms of Technology provider in terms of end Solutions"
Pending
Praj's addressable market share in CBG projects could range from 30% for specific technology provisions to 100% for complete turnkey solutions.
"I think it would be roughly between from say 30 to 100%"
Pending
Consistent CBG order inflow is expected within the next 6 to 18 months, indicating a recurring revenue stream.
"what consistency in terms of cgb order CBG order inflow we are expecting in say 6 12 months 18 months time that would can be recurring feature"
Pending
CBG projects are expected to yield decent blended margins, likely in the 8-10% range, comparable to the company's historical performance and below which Praj typically avoids taking orders.
"CBG I think would be a decent Blended margin it would not be as good as International orders but but I don't believe that CVG orders margin profile will dorate so they would be in line with what company has been kind of generating roughly around 8 to 10% Mark is something we that is roughly what they will be doing because below those margins PR doesn't even take orders"
Pending
Praj holds a 50-60% market share in domestic 1G ethanol production and 10% internationally.
"Market 50 to 60% it was more domestic ethanol production internationally 10% is the market share they have now"
Pending
The CBG segment faces significant competition from domestic players such as Thermax and GPS Renewables.
"for CBG uh I think there are there is good amount of competition the competition is little higher uh players like thermax GPS Renewables those kind of competitions are there in CBG"
Pending
Praj is expected to dominate the Sustainable Aviation Fuel (SAF) sector as it develops.
"for futuristic project so we can safely assume they will again kind of dominate on that space as well"
Pending
Praj consistently invests around 1% of its revenue in R&D, irrespective of market conditions.
"portion of their revenues they keep on spending on R&D and that spend has been independent of the macro factors whether the business is up whether it is down order inlow numbers if you see last eight years consistently praj has been spending around 1% of their revenues"
Pending
In FY24, Praj's R&D expenditure was approximately 3% of revenues, with capex contributing 2% and R&D expenditure 1%.
"just last year fi 24 May their capex as a percentage of R&D capex as a percentage of uh revenues for around 2% which is very high and they are re Rue expenditures a percentage of uh revenues for around 1% so total R&D expense was nearly 3%"
Pending
The company's revenue and profit have shown significant growth, with profitability reportedly increasing fivefold or more.
"Revenue profit so give you some numbers company so and half profits margins impr five times or more than that profitability jump so it's a reflection"
Pending
A potential risk for investors is a slowdown in the domestic capex cycle or order inflow.
"investors risk perspective there is a Slowdown in terms of CAPIC cycle from the domestic side or there is a Slowdown in terms of order and flow"
Pending
Opportunities will be created for Praj in the diesel sector within the next two to three years due to increased ethanol blending.
"and the idea is that we increase the ethanol blending in other products as well other molecules as well like in diesel end which is say in next two to three years so that will create another set of opportunities for PR apart from ethanol blending program opportunities"
Pending
2G ethanol plants are expected to become a trend in three to five years, but require time to become more viable and attract private capital due to higher costs compared to 1G plants.
"it will become but as I said it will take three to five years there are certain parts which needs to be addressed when 2G EOL plants are far more expensive than a 1 G ethanol plant so to become it make it more viable to to ensure that the private private cap side it will take certain time some time sure"
Pending
Praj aims for a 50/50 revenue split between domestic and international business within the next three to five years.
"but the management has guided that going ahead in the next 3 to 5 years they want to uh have a 50/50 Revenue split between domestic as well as exports"
Pending
International orders, particularly from the engineering side, are contributing to higher margins and earnings growth for Praj, despite revenue pressures.
"and now what is the benefit out of it internal domes orders okay because those are predominantly on the engineering side which get gets higher margins to revenue mix change which is a reflection of your order order book mix change so those were the reasons why there's a dichotomy in the terms of numbers where your revenue is under pressure but your margins are improving resultantly the earnings growth is there sure"
Pending
Praj targets achieving their 50/50 domestic and international revenue split by FY30, requiring at least five to six years.
"I think they would need at least five six years f530 is where I think they are targeting they're targeting"
Pending
Praj aims to reach an overall revenue of 9,000 to 10,000 crores by 2030.
"now their are Target is to reach say around 9 to 10,000 by 2030"
Pending
The government has targeted achieving 20% ethanol blending by 2025-2026.
"AB the government has targeted the 26 that if I'm not wrong 2025 2026 that 20% ethanol blending should be uh complete"
Pending
Achieving the 10,000 crore target is expected to take a significant amount of time beyond 2026.
"we think up to 10,000 CR Target AI 2026 is that so yeah it will take a larger amount of time to achieve the 10,000 CR Mark Target so yeah"
Pending
Praj aims for revenue to be approximately three times what was achieved in FY4, likely referring to a growth trajectory towards their 2030 target.
"basically three times what they have achieved in F4 which is com roughly around"
Pending
A 5% ethanol blending in diesel could create an opportunity equivalent to E15 blending in petrol.
"so even if we're talking about 5% blending in diesel that itself would created an opportunity which is nearly E15 in terms of petrol"
Pending
Ethanol blending with diesel is currently a work in progress and faces challenges, making it uncertain if targets will be met as easily as with petrol.
"ethanol blending with diesel is not that easy it is kind of work in progress currently because the way ethanol is homogeneous with petrol easily but if it fructifies then maybe they kind of achieve their target before it but it is a maybe currently"
Pending
An estimated 750 CBG plants requiring approximately 37,500 crores in capex are needed over the next four to five years to achieve 5% CBG blending by 2029.
"to give you the idea opportunity currently in India would be somewhere in the range of hundreds we are not even close okay right so this incremental 750 PL uh we would need a capex of around 37,500 crores okay in next say four to five years okay right"
Pending
Praj is expected to be a top-tier technology provider and solutions provider in the CBG market, though not as dominant as in the ethanol sector.
"now Praj would not be as dominant player in CBG as similar to ethanol where they have a market share of 50 60% but at least it will be a top cortile player in terms of Technology provider in terms of end Solutions right"
Pending
Praj's addressable market share in CBG projects can range from 30% for projects requiring specific technology and engineering to 100% for end-to-end turnkey solutions.
"I think it would be roughly between from say 30 to 100% so if it's a Tonky project end to end solution it would be 100% of that order if the only certain technology and knowledge is required from PR side certain engineering work is required from PR side it would be roughly around 30%"
Pending
Consistent CBG order inflow is expected to become a recurring feature within the next 6 to 18 months, contributing to a significant opportunity.
"so we can say the addressable market t% so roughly it can be from 10,000 to 37,5 so that's a huge opportunity but that's a long-term play so it has started trickling in but what consistency in terms of cgb order CBG order inflow we are expecting in say 6 12 months 18 months time that would can be recurring feature"
Pending
CBG orders are expected to have decent blended margins, likely around 8-10%, which are not as high as international orders but will not degrade the company's overall margin profile.
"CBG I think would be a decent Blended margin it would not be as good as International orders but but I don't believe that CVG orders margin profile will dorate so they would be in line with what company has been kind of generating roughly around 8 to 10% Mark is something we that is roughly what they will be doing because below those margins PR doesn't even take orders"
Pending
Praj holds a 50-60% market share in domestic 1G ethanol production and 10% internationally.
"Market 50 to 60% it was more domestic ethanol production internationally 10% is the market share they have"
Pending
There is limited listed competition for Praj in the 1G ethanol segment, with the market being largely fragmented and unorganized.
"on the 1G ethanol front uh predominantly on the listed space unfortunately we do not have much competition for br what we have is a fragmented unorganized market for 1G ethanol"
Pending
The CBG market faces significant competition from domestic players like Thermax and GPS Renewables.
"but for CBG uh I think there are there is good amount of competition the competition is little higher uh players like thermax GPS Renewables those kind of competitions are there in CBG they are domestic players yeah"
Pending
Praj is expected to dominate future markets, similar to their current positioning, likely referring to emerging sustainable fuel technologies.
"so we can safely assume they will again kind of dominate on that space as well yeah"
Pending
Praj consistently spends around 1% of its revenue on R&D, independent of business cycles or order inflow.
"portion of their revenues they keep on spending on R&D and that spend has been independent of the macro factors whether the business is up whether it is down order inlow numbers if you see last eight years consistently praj has been spending around 1% of their revenues"
Pending
In FY24, Praj's R&D expenses were approximately 3% of revenues (2% capex + 1% recurring expenditure), which is considered very high.
"just last year fi 24 May their capex as a percentage of R&D capex as a percentage of uh revenues for around 2% which is very high and they are re Rue expenditures a percentage of uh revenues for around 1% so total R&D expense was nearly 3% nearly 3% which is very good"
Pending
Potential factors that could slow down Praj's growth include a slowdown in the domestic capex cycle or a decrease in order inflow.
"investors risk perspective there is a Slowdown in terms of CAPIC cycle from the domestic side or there is a Slowdown in terms of order and flow"
Pending