Will future green Energy Initiative make Praj Industries a multibagger? प्राज में निवेश करना चाहिए या नहीं?

   1. Company & Business Strength: 9/10

Praj is a globally leading company with a bouquet of sustainable solutions for bioenergy, high-purity water, critical process equipment, breweries, and industrial wastewater treatment. It is Headquartered in Pune, India, and has spread its presence across the globe with 100+ countries across all 5 continents.

It is India’s most successful company in the field of bio-based technologies and engineering with a presence all over the world. it began its operation with Ethanol Plants.

Praj’s solutions are ably supported by world-class manufacturing facilities located in India - in Pune, Gujarat, and Mumbai.

Praj aspires to be a major player in the environment, energy, and agri-processing-led applications providing innovative, integrated solutions including plant, equipment, and products that will enhance the quality of life.

Business Segment:

Bio Energy:

The product includes India’s most successful company in the field of bio-based technologies and engineering with a presence all over the world. 

Around 80% of the ethanol produced globally is used as a vehicular fuel. With the increasing demand for cleaner fuels and an attempt to reduce dependence on crude oil, more than 60 countries in the world are at different stages of ethanol blending.

                                                               

High Purity Systems:

Addressing the pharmaceutical, biotech, cosmetics, and wellness sector, Praj Hipurity Systems, a wholly owned subsidiary, is engaged in providing high-purity water and hygienic systems to the pharma industry.

Critical Process Equipment and Skids:

This vertical serves a wider sectoral requirement for high-end equipment & systems finding applications in the oil & gas, petrochemical, fertilizer, and chemical industry.

Wastewater Treatment:

Praj offers integrated wastewater treatment systems and has an established name in the industrial sector with a wide range of solutions. This vertical addresses industrial applications for high-quality water.

Brewery & Beverages:

This synergistic business came into being in the early 90s. Right from conceptualization, technology, design, and plant engineering up to project installation and commissioning - Praj offers complete solutions backed by expertise and experience.

2. Competitive Strength: 9/10

Praj Industries is an Engineering company specializing in various solutions for Bioenergy, water treatment, etc. competitors with engineering solutions include Thermax, HLE glass coat, AIA engineering, BHEL, GMM Pfaudler, etc.

Also water treatment solutions like Ion exchange and NCC limited.

3. Stock Analysis Return & PE Ratio: 7/10

Praj Industries Stock is listed both in NSE, and BSE and currently trading around 430 (Jan 2022), with 52 highs of 440s and a low of 110s.

It has a market cap of 7800+ which is a small cap, Stock has been consolidating for a long time over the years, in fact, gave negative returns, until after 2020 when it gave multifold returns.

The stock has given a 3-year CAGR of 44.2% which is exceptional. 

The face value is 2, so expect split, bonus, and buybacks.

PE Ratio: Praj Industries Ltd has a PE of 63 currently which is expensive.

4. Dividend: 7/10

The stock has been giving a good dividend of 0.5%. Generally, we expect a growing company to give atleast 1% dividend which is a good gesture and sign unless high Capex is planned.

Financial Ratios:

5. Sales Growth/Revenue: 5/10

The Sales growth indicates that the company can capture the market, and which may increase profitability.  

Praj Industries has a 3-year median Sales growth of 13.61% which is fair. Current year (2021) growth stands at 15.06%. For Small caps, we consider the growth of atleast 20%+ as healthy sales. 

6. Profit Growth: 6/10

Sales growth indicates a good income, but unless profit is not made it's terrible. Profit growth indicates how expenses are managed or also how the company has pushed the raw material prices to end customers.

Praj Industries Profit growth stands at a 3-year median of 31.29% which is very good, Current year stands at 10.09%. For Small cap, atleast 20-25+% is considered as healthy growth in Profitability.

7. [ROE] & [ROCE] %: 5/10

Return on Equity:

ROE indicates the ability to generate profits from shareholders/Equity Investments. Praj Industries ROE has a 3-year median of 9.08%.  The current year stands at 9.64%. 

We consider a healthy ROE to be atleast 20% for growth companies.

Return on Capital Employed:

ROCE indicates the ability to use its capital employed for business. Praj Industries ROE has a 3-year median of 11.89%.  The current year stands at 13.37%. 

We consider a healthy ROCE to be atleast 20% for growth companies.

8. Debt/Equity: 10/10

D/E is a measure of which a company is running through debts vs owned funds. Ideally, D/E should be less than 1, which indicates stability. 

Praj Industries has a D/E of 0 which is good. Unless capital expansion or any other is required, a low debt is always good to maintain profitability.

We consider debt-free or D/E<0.1 to be healthy. 

Note: Company has reduced debt recently.

9. Shareholding %: 8/10

The company has a high Promotor holding of 32.83%. The FII and DII of 14.98% and 8.41% indicate Institutions have good holding too, Remaining area is Public.

Note: The Promoter Pledging % is 0% which is good, generally no pledging indicates a good sign.

Another indicator like interest coverage ratio, Return on Assets[ROA], and others also seems good.

10. Future Prospects: 9/10

Pros:

Bright growth potential with a futuristic view in terms of ethanol, bioenergy, and clean energy.   

Ethanol-based vehicles in the future may boost sales of Praj.  

Diversified business.

The company is almost debt free.

Praj Industries has been a beneficiary of the Aatmanirbhar Bharat initiative & Clean/Green Energy.

Cons:

The high valuation of the stock.

capital-intensive business.

Not very exciting financial data with fair Sales, ROE, and ROCE in the last 3 years.

Investment Hacks Score Card: 

The average score of Praj Industries based on all factors comes to be 7.5/10.

Conclusion:

Overall Praj Industries seems to have good diversified Business in many areas especially future initiatives like Green and clean energy. Although not a very good financial due to high capital-intensive business, there are expectations in the future to improve this in terms of various initiatives taken in future energy requirements.

The stock has given good returns to shareholders too recently. But Since this is a small-cap stock, Investors can see volatility in the future and should carefully watch future plans and growth.

Disclaimer:

Since this is an educated opinion, Please research thoroughly or consult your financial advisor before Investment.

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Team Investment Hacks