Praj Industries Stock Alert! Brokerage Cuts Estimates, Slashes Target Price - Is it Time to Hold?

Prabhudas Lilladher's latest research report on Praj Industries highlights several key concerns and prospects impacting the company's outlook.

**Estimates Revision and Performance:** The brokerage has revised its Earnings Per Share (EPS) estimates for FY27 and FY28 downwards by 10.3% and 3.2%, respectively. This adjustment is attributed to anticipated lower domestic demand and delays in order booking and execution from the GenX facility. Praj Industries reported a weak financial quarter, with revenue increasing by a mere 3.1% year-on-year. Furthermore, its EBITDA margin saw a sharp contraction of 490 basis points year-on-year, falling to 6.6%, largely due to increased other expenses related to the GenX facility.

**Domestic Challenges and Diversification:** Persistent execution challenges and subdued demand for new ethanol plants, especially after meeting the Ethanol Blending Programme (EBP) 20 target, continue to weigh on the domestic BioEnergy segment. Several identified Ethanol Blending Programme (EBP) projects have stalled. However, Praj's diversification efforts into areas like Compressed Biogas (CBG), Bio Bitumen, biopolymers, and Sustainable Aviation Fuel (SAF) are gradually gaining momentum, offering some visibility for medium-term growth.

**International Prospects:** The international front presents an encouraging picture, supported by supportive policy measures across Latin America, Africa, and Asia. A significant development is the order for the first-ever low-carbon ethanol demonstration plant from the USA, which improves Praj's global positioning despite ongoing tariff headwinds.

**Outlook and Rating:** The stock is currently trading at a Price-to-Earnings (P/E) multiple of 27.5x for FY27 estimates and 22.3x for FY28 estimates. Prabhudas Lilladher has rolled forward its valuation to September 2027 (Sep’27E) and maintained its 'Hold' rating. The target price has been revised downwards to Rs 353 from Rs 393, valuing the stock at a PE of 26x Sep’27E earnings (previously 29x Mar’27E).

**Impact** This analyst report, with its specific revisions in earnings estimates, a reduced price target, and a reiterated 'Hold' rating, is likely to impact investor sentiment for Praj Industries. The market will closely evaluate the company's ability to navigate domestic challenges while capitalizing on its diversification and international expansion plans. The stock may experience near-term price adjustments as investors digest this detailed outlook. Rating: 6/10

**Difficult Terms** * **EPS (Earnings Per Share):** The portion of a company's profit allocated to each outstanding share of common stock. * **EBITDA margin:** Earnings Before Interest, Taxes, Depreciation, and Amortization margin. It measures a company's operating performance. * **GenX facility:** A specific operational unit or technology platform of Praj Industries. * **ETCA projects:** Likely refers to projects associated with energy transition or carbon reduction initiatives, possibly related to ethanol. * **EBP 20 (Ethanol Blending Programme 20%):** A government initiative to promote the blending of ethanol with petrol to reduce dependence on fossil fuels and lower emissions. * **BioEnergy segment:** Business division focused on producing energy from biological sources. * **CBG (Compressed Biogas):** Biogas that has been compressed to a higher pressure for storage and transport, similar to natural gas. * **Bio Bitumen:** Bitumen (a residue of petroleum distillation used in road construction) produced from renewable biological sources. * **Biopolymers:** Polymers derived from renewable biomass sources, offering a more sustainable alternative to petroleum-based plastics. * **SAF (Sustainable Aviation Fuel):** Aviation fuel produced from renewable resources such as agricultural waste, used cooking oil, or other sustainable sources. * **P/E (Price-to-Earnings ratio):** A valuation ratio that compares a company's stock price to its earnings per share. It indicates how much investors are willing to pay per dollar of earnings. * **FY27/28E (Fiscal Year 2027/2028 Estimates):** Projections for the company's financial performance during the fiscal years ending in 2027 and 2028. * **Sep’27E / Mar’27E (September 2027 Estimates / March 2027 Estimates):** Specific earnings estimates for those particular financial periods. * **TP (Target Price):** The price level at which a stock analyst or broker believes a stock will trade in the future. * **Basis Points (bps):** A unit of measure equal to one-hundredth of a percent (0.01%). 100 bps equals 1%.