Following is an excellent report on Ethanol Blending.
For some great insights on Sector and the Company
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Can anyone pls explain How this news is related to praj
Here is some good news for Ethanol
We cant replace Petrol by Ethanol 100%
The current measures of converting the excess sugar into ethanol is only specifically for the âexcessâ sugar produced.
The sheer demand cant be met and neither can you grow so much of sugarcane.
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Praj management said that âthey have developed technology to produce ethonol using agri residue as well.â many plants would be developed in coming year using this technology.
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We will have to also understand the economics of producing Ethanol. Presently production cost of Ethanol is more then Petrol. Beyond a point it will not be economically beneficial to push Ethanol in lieu of Petrol. Sugarcane is water guzzling crop and environmentally also it will not be advisable to push sugarcane for ethanol beyond a point.
In my opinion Ethanol story gets priced in Priced in Praj current valuation(+/-10%). For further increase in valuation Praj High Purity narrative has to convert into numbers.
With due respect to the management, it has always given narrative on Praj High purity but never discussed on numbers.
It will be interesting to watch narratives playing out into numbers in future for Praj High purity and other segments.
Disclosure: Invested from lower levels and booked partial profits at peak currrent valuation.
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I thought apart from ethanol from sugar cane , they have also expertise for producing ethanol from Agri waste residuesâŚ
I find from their website that they are also in to waste water management and water purification systems ⌠Not sure how active are they in water management systems which has also great future potential.
Disclaimer:
Have tracking position
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I second to you reason is most vehicals designed for 0 ethanol ⌠Vehicle are not designed and as per NITI Ayog the trails are started since 2013-14 f0lor maximum 20% blending ⌠. It has strong affinity for water so the blending can be limited . With increased blending the strengths of PVC and elastomers detoriates
The regulatory provisions ip to 20% is made but that too for only comercial use not for automotive purposes for automobiles it is max up to 85% in BS-IV
Next is the cost of vehicals will increase so presure would of various automobile companies to delay the release of version of vehicals will be.more because the performance of the vehicle will be not what they promise on advertisements and the cost of maintenance will increased.
It is cleaned resource yet to tap its full potencial govt has to check and reformulate the safety standards EVEN China has only targetef to 10% blending I am NOT saying CHINA is the stanadard comparision Yet even most developed nations Accpet Brazil has not yet incrased the blending âŚ
Praj is now overbought and overvalued and future cash flow is now part of its current valuation and this euphoria will end soon but the the real dent will to the retail investers ⌠IT iS GOOD for sugar companies they have increased VALUATUIONs and help tem.to pay their debts by selling the stock ⌠yet i convince the PARTY will soon be over
Regards
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I donât think it is overvalued. If we go by last quarter profit and company guidance EPS which is around 5 now should be atleast 12 in 2-3 quarters then PE will be around 30 then compared to 80 now. And company has much more offer apart from Ethanol.
Please feel free to correct if I am wrong.
Reference: https://youtu.be/-L7WGwYGTUc
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In Brazil, current mandate is 27% blending code named E27 which is already implemented since 2016.
The technology is already available to have cars to run on 100% alcohol and such cars are already running in Brazil.
https://documentcloud.adobe.com/link/track?uri=urn:aaid:scds:US:3d94268f-ac72-4a30-8305-84e3ebf52429
https://www.transportpolicy.net/standard/brazil-fuels-biofuels/
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Diverting Surplus Sugarcane for Ethanol makes huge sense but growing Sugarcane/Corn for Ethanol is nonsense.
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Hi @VALUE2017, @Shuchi_Nahar - tagging you since you seem to have followed this story quite well.
Can Praj be a steady compounder once it grows to the base of say 3000-4000 Cr of revenue? Or do we expect a revenue compression once the India ethanol story plays out? While there are segments like CBG, HiPurity etc. Praj is predominantly an ethanol play - anything else is an icing on the cake.
In case it is the former, then the stock offers reasonable value given a significant room for margin expansion. In case it is the latter, it becomes very hard to judge the business from an investment perspective.
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As already advised in my earlier post:
"In my opinion Ethanol story gets priced in Praj current valuation(+/-10%). For further increase in valuation Praj High Purity narrative has to convert into numbers.
With due respect to the management, it has always given narrative on Praj High purity but never discussed on numbers.
It will be interesting to watch narratives playing out into numbers in future for Praj High purity and other segments.
Disclosure: Invested from lower levels and booked partial profits at peak currrent valuation."
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Good insight on the road ahead.
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