Praj Industries shares continued their upward momentum, marking a second consecutive trading session of gains. On Monday, the shares surged 3% to ₹409 apiece in intraday trade following a 7.3% rally in the previous trading session.
This strong spike in shares came after the company signed a term sheet with Indian Oil Corporation (IOC) to enhance biofuels production capacities in India. This MoU encompasses various biofuels, including SAF, ethanol, CBG, biodiesel, and bio-bitumen, among others.
Earlier in October 2021, both Companies had entered into an agreement to form a 50:50 joint venture to this end. Domestic brokerage firm Centrum Broking said that this partnership is poised to attract significant order accretion for Praj Industries in the medium to long term.
"The inclusion of SAF, Ethanol, CBG, Biodiesel, and Bio-bitumen underscores the comprehensive nature of their efforts and highlights their commitment to sustainable and eco-friendly energy alternatives. By combining their respective strengths, the partnership seeks to contribute to India's energy security, promote clean energy solutions, and reduce the nation's carbon footprint," the brokerage added.
While the Praj Industries shares have faced lackluster performance over the past twelve months, primarily due to concerns about order inflow visibility, the brokerage believes that the company's focus on efficient execution, improved return ratios, and strong cash flow generation will contribute to superior performance going forward.
Additionally, the company recently revealed plans for a capital expenditure of approximately ₹100 crore for its CPES business, which primarily caters to exports, which is likely to benefit its FY25 engineering division performance, which the brokerage believes is not factored in the current price.
“We believe that the market has not fully accounted for various initiatives taken by Praj Industries to continue its growth journey, and thus, we maintain our 'buy' rating on the stock with a target price of ₹535 apiece,” said Centrum Broking.
This target price implies a new life time high for the stock and hints at an upside of 31% from its latest closing price.
Similarly, Axis Securities expresses confidence in the company's growth prospects and said the company is a pure equity play on the India Ethanol Revolution and is now expanding its footprints globally.
"The company has also a very strong focus on Engineering business, providing solutions across CPES, ZLD, & ETP segments that caters to the growing industry, which makes us confident of the company's growth prospects," said the brokerage firm.
The brokerage also continued with its 'buy' recommendation on the stock with a target price of ₹500 apiece, implying a 22.25% upside from the CMP. Earlier in March, Systematix Institutional Equities initiated coverage on the stock with a price target of ₹458 apiece.
With its dominant share of more than 50% in 1G ethanol and its status as the only player in 2G ethanol, Praj Industries is poised to take advantage of the rising demand for biofuels, including ethanol blending in diesel and flex-fuel engines, said the brokerage firm.
Praj Industries is a small-cap stock with a market capitalisation of ₹7,531 crore. It offers a range of sustainable solutions for industries such as bioenergy, high-purity water, critical process equipment, breweries, and industrial wastewater treatment.
05 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
