Brokerage firm Prabhudas Lilladher has maintained a 'Buy' rating on Praj Industries with a target price of INR 353, despite reducing earnings estimates for FY28 and FY29. While domestic ethanol project delays have pressured revenue, the firm highlights long-term potential in international markets and new segments like data centers. The stock has been under pressure, falling roughly 21% in the last month to close at INR 241.70.
Prabhudas Lilladher has maintained a 'Buy' rating on Praj Industries with a revised price target of INR 353. This decision comes even after the brokerage lowered its earnings per share estimates for the company for fiscal years 2028 and 2029 by 14.7% and 7.8%, respectively. The move reflects a difference between the brokerage's long-term outlook and the recent weak stock performance. Praj Industries shares have faced significant selling pressure recently, falling about 21% over the past month to close at INR 241.70 on November 1, 2026.
The earnings revision follows a soft second quarter for the company, where revenue grew by just 0.9% compared to the previous year. The brokerage noted that the domestic 1G ethanol market, which has been a primary business area for Praj Industries, is facing problems. Factors such as customer funding constraints and supply-demand imbalances in the sugar-based ethanol sector have slowed down project execution. This has made it difficult for the company to turn its large order backlog into immediate revenue.
Despite these short-term issues, the brokerage points to a solid financial foundation. Praj Industries remains a net-debt-free company with healthy cash reserves. It also holds a robust order backlog of approximately INR 44.55 billion. Profitability has shown signs of improvement, with operating profit margins rising to 6.18% in the second quarter of fiscal year 2027, up from 3.81% in the same period a year earlier.
To reduce its dependence on the domestic ethanol market, the company is shifting its strategy toward international growth and new technology sectors. It has built an international project pipeline of roughly INR 10 billion across regions like Brazil, Argentina, and Southeast Asia. The company is also entering the data center market, where it expects revenue visibility of INR 5 billion to 6 billion over the next year. Other growth areas include compressed biogas projects, managed through a joint venture with Bharat Petroleum, and ongoing work in sustainable aviation fuel technologies.
Investors should be aware of the risks involved. The primary concern is the delay in executing the current order book. While the company has secured orders, the speed at which these projects are completed remains uncertain. Furthermore, the company is spending heavily on research and development for new technologies like GenX. While this spending is for future growth, it can lead to fluctuations in profit margins in the short term.
The next important steps for investors to track will be the actual pace of order execution and whether new business segments, such as data centers and sustainable fuels, start to contribute to revenue as the company expects.