Praj Industries

Praj Q4FY22 Concall

Ethanol blending have reached close to 10%. To achieve the 20% blending target India neads capacity to make 1400crore of ethanol for that we need capacity close to 1900cr to address the seasonality in the availability of feed crops. Current capacity of installed capacity is 850cr

Future growth of Biofuel based on 27% blending , Diesel blending and flexi fuel engines where 100% ethanol can be used, compressors based on ethanol fuel.

2G ethanol plant in Europe have been delayed by at least 6 months due to Russian war

CBG plant for IOCL commissioning will happen in Q2, CBG prices have increased from 46 to 54 per kg has made projects viable as prices have been indexed to CNG based on rice straw, this will be our 3rd plant commissioning. We expect increased demand after favorable pricing

Depending on the feed stock revenue per CBG plant will be around 30-120crs per plant. Govt wants to do 5k CBG plants. Sugar companies also planning to get into CBG due to feedstock availability

Due to debottlenecking, seasonality of the business will be reduced going forward.

Effective tax rate will be 25% going forward.

E20 fuel will get all full benefits in new vehicles which are E20 compliant , the older cars will also run on E10 only that the benefits can’t be reaped. Maruthi has already notified that their newer cars will be E20 compliant

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Lot of stories for CBG and other biofuels for last 2 to 3 years, however there is hardly any reflection in numbers…

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image

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More avenues to be tapped by Praj

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Has there been any official statement by the Govt. regarding blending in diesel? I keep reading statements in some articles regarding diesel blending, but I doubt there has been any official notice from GoI. Am I missing something?

Disc. - Invested

Ethanol blending in Diesel is not yet started

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“Electric cars are not going to be a large part of car sales in India, irrespective of what other manufacturers are saying or planning.” - RC Bhargava, Chairman Maruti

Good article to go through how car manufacturers believe market going to play around in future. IMO Electric vehicles are easier said than done. A lot of work to be done beforehand to make it accessible for masses.

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Very nationalist company

We wish to inform you that the Board of Directors of your Company has, at its meeting held on 25th May 2022 recommended dividend of Rs. 4.20 per equity share of the face value of Rs. 2 each, for the financial year ended 31st March, 2022 (comprising of final Dividend @ 135% plus a Special dividend @ 75% on account of Amrit Mahotsav in commemoration of 75 years of independence).

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Management Interview

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does this impact or help? Praj has a good market share atleast in india.

Of course it will help Praj. Adani & RIL will setup plants with the help of Praj.

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Average to poor results by Praj. 200bps decline in EBITDA QoQ due to gross margin slippage. Praj continues to be overvalued in my opinion. Narrative stronger than execution.

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Praj is a technological and R&D company however its margin are consistently comparable to a normal EPC contractor.

Year
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Margins
8% 7% 9% 9% 8% 10% 9% 5% 8% 8% 9% 8% 9%

Sales
553 880 726 783 801 824 729 697 923 942 1,089 2,053 2,387

During the last 11 years sales increased from Rs 553 Cr to Rs 2053 Cr but margins are stagnant at aound 8-9%.

Its high time now that narrative is converted into numbers.

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It’s basically converted to social media stock, lot of noise but little fire power, margin is a huge issue here & will be stagnant , only way to enhance margin is to get into Bio based downstream chemicals, waiting for co to launch it’s own manufacturing capabilities,

And there is no vision from Management so far to turn these capex revenues to opex ones. They seem quite happy to sit on a huge order book and churn out 8-10% EBITDA quarter after quarter. Their HPS revenues have de-grown YOY, all the focus seems to be on Ethanol.

The stock is full of optionalities and experts seem to rate their scientific capabilities highly (Also evident in the quality of their JVs and collaborations), but execution has been very lacklustre.

Have a buy order at INR 280, think that’s where value lies in this stock. But the story is strong enough that we may not get to see that price.

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I always wonder what happens to these companies once the capex cycle is over. No reason to give over the top valuations for these companies which are not much different than construction companies.

A general question since I see margin discussed in every thread in VP.

Let’s say there are two consistent businesses.

  1. Grows profit at 25% at margin of 10%.
  2. Grows profit at 10% with margin of 20%.

I would take 1 hands down. It is higher risk but I would exit if profit growth falls. But would never take 2. But it seems I am missing something.

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Anyone having Praj Q1 call recordings or notes ?

https://t.co/HIJlPg1TxR

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