Hey there, fellow readers! Now is the perfect moment to discuss the Praj Industries fundamental analysis. The company is currently the hottest stock in the market, and for good reason. Its strong performance indicates that it may take off any moment now in the near term! You know, Mid caps are of my favourite types. They are less risky than small caps and tend to generate more profits than the large caps. It’s like finding that sweet spot in the market.
Just imagine this scenario: while others are still waiting for the right time, patiently anticipating the bull run, we might be the savvy ones who spot the perfect stock at the right moment. How thrilling would it be to seize this opportunity and book hefty profits? So, let’s get started with the Praj Industries’ fundamental analysis.
PRAJ Industries Ltd- About the company
PRAJ Industries Ltd. is engaged in the provision of process engineering and solutions for beverage alcohol and bioethanol plants, brewery, water and wastewater treatment plants, critical process equipment and systems, and bioproducts industry. The company stood 2nd in a list of the world’s 50 Hottest companies in the global bio-economy for 2021 in the Low Carbon Fuels and Renewable Chemicals category.
Its product portfolio is diversified into: Bioenergy (71%), High Purity Systems (9%), Engineering Products (20%). Praj Industries Ltd has a presence across the globe with more than 750 references in more than 75 countries. It began as a supplier of an ethanol plant, today it is a global company providing various solutions with a focus on the environment, energy, and agri-process industry.
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Industrial Trend: Future of Engineering Industry in India
The engineering sector is the largest of the industrial sectors in India. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. This achievement is backed by several reasons. They are:
Competitive Advantage in Engineering: India is really good at engineering in many ways. They have an edge in areas like keeping manufacturing costs low, knowing what people want to buy, using advanced technology, and coming up with innovative ideas.
Remarkable Growth: In the past few years, India’s engineering sector has grown a lot. This growth has been fueled by investing a lot of money in building things like roads, bridges, and factories.
Strategic Importance: The engineering sector is super important for India’s economy because it’s closely connected to making stuff and building things like infrastructure. These things are crucial for the country’s growth and success.
Opportunities ahead
As per IBEF, a Trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India:
Capital Goods sector contributes to 12% of India’s manufacturing output and 1.8% to GDP. Market valuation of the capital goods industry was US$ 43.2 billion in FY22. The electrical equipment market share in India is expected to increase by US$ 33.74 billion from 2021 to 2025 at a CAGR of 9%. Domestic electrical equipment market is expected to grow at an annual rate of 12% to reach US$ 72 billion by 2025.
In Budget 2023-24, Government has committed an outlay of Rs. 10 lakh crore (US$ 120 billion) during 2023-24 towards infrastructure capital expenditure compared to Rs. 7.5 lakh crore (US$ 90 billion) (BE) during 2022–23. The engineering industry has been de-licensed and allows 100% foreign direct investment (FDI). Additionally, it has grown to be the biggest contributor to the nation’s overall merchandise exports.
www.ibef.org
In simple, the future of Engineering and capital goods industry in India is very bright. Government support and favourable policies has given a boost to this sector. No doubt, the industry is experiencing rapid growth which is because of the increased demand in the engineering industry segment and heavy investments and capacity creation in core sectors.
Praj Industries projects
Praj to set up India’s largest capacity sugarcane syrup based ethanol plant for
Godavari Biorefineries.
By gaining a huge contract to construct India’s largest syrup-based ethanol plant in Karnataka, Praj Industries achieved a tremendous milestone. Respected client Godavari Biorefineries Ltd (GBL) has chosen Praj to increase its remarkable 600 KLPD ethanol production capacity utilising sugarcane syrup. Once finished, this ground-breaking initiative will become the largest syrup-based ethanol facility in the nation.
Axens and Praj Industries Limited sign MoU for Sustainable Aviation Fuel (SAF) projects in India
Axens and Praj have joined hands through a Memorandum of Understanding to work together on projects in India for producing Sustainable Aviation Fuel (SAF) using low carbon alcohols via the Alcohol-to-Jet (ATJ) pathway. India ranks among the top five aviation markets globally and is expected to experience robust growth over the next two decades.
To achieve its Net Zero target, the Indian government is contemplating the implementation of SAF mandates to reduce carbon emissions in the aviation sector. While individually, Axens and Praj will continue to offer their technologies for producing low carbon ethanol from cellulosic biomass both in India and abroad.
Praj & ESIIC partner to accelerate bioeconomy in Egypt
An MoU between Egyptian Sugar and Integrated Industries Company (ESIIC) and Praj Industries Limited (Praj) has been made public. Both parties will be leading sustainable climate efforts as part of this MoU to mitigate the negative effects of climate change.
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Praj Industries Fundamental Analysis – Essentials & Financials
Market Capitalisation– Praj Industries, with a market cap of ₹7,877 Cr, has demonstrated strong performance with an operating revenue of Rs. 3,527.26 Cr on a trailing 12-month basis. The company’s outstanding annual revenue growth of 50% is remarkable.
Company’s Financial Health: Praj Industries has maintained generous profitability ratios as ROCE stands at 31.0% and ROE stands at 23.7% showing strong performance. This indicate that it efficiently utilizes its capital and generates good returns for its shareholders,
P/E Ratio: A key metric for stock evaluation, the Price to Earning Ratio for Praj Industries stands at 30.6, which is lower than the sector’s P/E ratio of 49.3. This lower P/E ratio makes the company’s stock more attractive compared to its peers, as investors are getting the stock at a relatively lower price per earnings.
Earnings per Share: Talking about Earnings per share, a crucial metric for stock evaluation stands at TTM 14.00 indicating a significant YoY growth of 51.88%. This is a healthy sign as it tells about company’s profitability and potential for future prospects.
PEG Ratio: PEG ratio which is a more accurate measure for future performance, stands at 0.66. This indicates that the stock is potentially undervalued and has room for growth. This makes the stock attractive from an investor’s perspective.
Debt-to-Equity: Company has almost zero Debt to Equity Ratio as the company is debt-free. This careful debt management approach is encouraging since it improves the company’s financial stability and reduces possible financial risks.
Dividend: Praj Industries also offers a healthy dividend payout, with a dividend of Rs 4.50 and a yield of 1.05%, amounting to a dividend payout of 44.9%.
Summing up, financial health of the company seems to be very good with strong performance, attractive valuations and prospects for future growth.
Shareholding Pattern
Promoters: As of the June 2023 quarter, there has been no change in the promoters’ holding, which remains steady at 32.82%. However, Foreign Institutional Investors (FII/FPI) have slightly increased their holdings from 17.83% to 18.30%, indicating growing interest in the company.
Mutual Funds have also shown confidence in the company’s prospects, as their holdings have increased from 6.26% to 6.57% during the same quarter. The number of Mutual Fund schemes invested in the company remains unchanged at 15, reflecting sustained interest from this category of investors.
Institutional Investors have shown a positive sentiment, as their holdings have increased from 25.66% to 26.70% in the June 2023 quarter. This indicates that larger institutional players are also recognizing the potential of Praj Industries and adding to their positions.
The shareholding patterns indicates the increasing confidence of both foreign and domestic institutional investors in the company. This is favourable to the company as it will boost the confidence of other investors as well.
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Evaluating Financial Statements: Praj Industries Fundamental Analysis
Income Statements| Profit & Loss Statements
Certainly, let’s delve into the income statements of Praj Industries Ltd. for the 5-year period from March 2019 to March 2023. During this timeframe, we will closely examine the company’s revenues, expenses, profits, and other financial metrics.
Income Statements of Praj Industries Ltd. Source: Data compiled using moneycontrol.com
Revenues: Over the 5-year period from March 2019 to March 2023, the revenues from sales have experienced significant growth. In March 2019, the total operating revenues were approximately 1,141 crores, and by March 2023, they had substantially increased to 3,528 crores. This represents an impressive rise of approximately 209.23% in revenues during the specified period.
Expenses: Company’s expenses remained less than the revenues throughout the period indicating a consistent generation of profits.
Net Profit: The net profit of Praj Industries has witnessed a remarkable surge, soaring from 68.21 crores in March 2019 to an impressive 239.82 crores in March 2023. This phenomenal growth represents an approximate growth rate of 251.6% over the specified period.
EPS:
Earnings per share is a valuable metric to analyse the financial performance of the company. A positive and consistently growing EPS signifies an upward trend in the company’s earnings. This growth makes the company’s stock more appealing to investors and signals sustained profitability and potential for further growth.
In the case of Praj Industries Fundamental analysis, their diluted EPS has shown a consistent rise. Starting from Rs 4 per share in the fiscal year 2019 to Rs 13 per share in March 2023. The growth rate of Diluted EPS for Praj Industries from the fiscal year 2019 to March 2023 is approximately 225%.
Dividend Payout: Over the past 5 years, the dividend payout of Praj Industries has shown a declining and fluctuating trend. In the fiscal year 2019, the dividend payout was 57%, which increased to 70% in 2020, but then dropped to 34% in March 2023. This inconsistency in dividend payouts may indicate varying financial conditions or strategic decisions by the company.
| Consolidated Profit & Loss account | ------------------- in Rs. Cr. ------------------- | |||||
|---|---|---|---|---|---|---|
| Mar 23 | Mar-22 | Mar-21 | Mar-20 | Mar-19 | ||
| 12 mths | 12 mths | 12 mths | 12 mths | 12 mths | ||
| INCOME | ||||||
| Revenue From Operations [Gross] | 3,462.80 | 2,294.52 | 1,285.81 | 1,079.67 | 1,121.23 | |
| Revenue From Operations [Net] | 3,462.80 | 2,294.52 | 1,285.81 | 1,079.67 | 1,121.23 | |
| Other Operating Revenues | 65.24 | 38.8 | 18.86 | 22.7 | 19.89 | |
| Total Operating Revenues | 3,528.04 | 2,333.32 | 1,304.67 | 1,102.37 | 1,141.11 | |
| Other Income | 35.6 | 36.19 | 25.74 | 30.02 | 32.3 | |
| Total Revenue | 3,563.64 | 2,369.51 | 1,330.40 | 1,132.39 | 1,173.41 | |
| EXPENSES | ||||||
| Cost Of Materials Consumed | 2,229.19 | 1,481.13 | 730.97 | 567.02 | 601.33 | |
| Depreciation And Amortisation Expenses | 30.25 | 22.59 | 22.12 | 21.85 | 22.95 | |
| Other Expenses | 751.01 | 468.17 | 284.01 | 307.96 | 291.67 | |
| Total Expenses | 3,244.92 | 2,164.63 | 1,217.30 | 1,049.25 | 1,085.48 | |
| Profit/Loss Before Exceptional, ExtraOrdinary Items And Tax | 318.72 | 204.88 | 113.11 | 83.13 | 87.93 | |
| Profit/Loss Before Tax | 318.72 | 204.88 | 113.11 | 83.13 | 87.93 | |
| Total Tax Expenses | 78.91 | 54.64 | 32.05 | 12.7 | 19.72 | |
| Profit/Loss After Tax And Before ExtraOrdinary Items | 239.82 | 150.24 | 81.06 | 70.44 | 68.21 | |
| Profit/Loss From Continuing Operations | 239.82 | 150.24 | 81.06 | 70.44 | 68.21 | |
| Profit/Loss For The Period | 239.82 | 150.24 | 81.06 | 70.44 | 68.21 | |
| OTHER ADDITIONAL INFORMATION | ||||||
| EARNINGS PER SHARE | ||||||
| Diluted EPS (Rs.) | 13 | 8 | 4 | 4 | 4 | |
| DIVIDEND AND DIVIDEND PERCENTAGE | ||||||
| Equity Share Dividend | 77.03 | 39.66 | 0 | 95.32 | 46.45 |
Summing up, Income statements of Praj Industries is decent and generous results can be expected in the upcoming years.
Cash Flows Statements
Cash flow statements are vital for investors and creditors as this provides a precise picture of the business’s capacity for cash generation, liquidity management, and payment of debt. While evaluating the company’s financial stability and long-term viability, this data is crucial. Careful analysis of Praj Industries fundamentals revealed the following figures.
Cash Flow Statements of Praj Industries Ltd. Source: Data compiled using moneycontrol.com
Operating Cash Flow (OCF): Cash flows from operating activities reflects the cash generated from its core business operations. A positive and growing OCF indicates that the company’s operations are generating sufficient cash to sustain and expand the business. Praj Industries’ OCF is declining for the past 3 years. Though it is still positive but the figures have declined from 225 crores in March 2021 to 162 crores in March 2023.
Cash Flow from Investing Activities: These figures are related to investing activities, such as acquisitions, capital expenditures, and investments in assets. Negative cash flows here might be expected due to expansion or modernization, but excessive negative cash flows could raise concerns about the company’s ability to generate returns on investments. Despite the figures are negative, improvements can be seen over a period of 3 years.
Cash Flow from Financing Activities: these include proceeds from issuing debt or equity and payments for dividends or debt repayment. A company relying heavily on debt to fund operations may carry higher financial risk. Here we can see a rise in declining trend in this metric.
| Consolidated Cash Flow | ------------------- in Rs. Cr. ------------------- | |||||
|---|---|---|---|---|---|---|
| Mar '23 | Mar '22 | Mar '21 | Mar '20 | Mar '19 | ||
| 12 mths | 12 mths | 12 mths | 12 mths | 12 mths | ||
| Net Profit Before Tax | 318.73 | 204.88 | 113.1 | 83.14 | 87.93 | |
| Net Cash From Operating Activities | 162.13 | 174.73 | 225.09 | 14.68 | 32.99 | |
| Net Cash (used in)/from Investing Activities | -84.44 | -126.77 | -164.32 | 62.07 | -5.91 | |
| Net Cash (used in)/from Financing Activities | -93.4 | -44.35 | -6.29 | -98.04 | -43.44 | |
| Net (decrease)/increase In Cash and Cash Equivalents | -8.88 | 6.35 | 55.27 | -17.72 | -13.67 | |
| Opening Cash & Cash Equivalents | 107.46 | 101.11 | 45.84 | 63.56 | 77.23 | |
| Closing Cash & Cash Equivalents | 98.58 | 107.46 | 101.11 | 45.84 | 63.56 |
Net Cash Flows has also declined in three years time frame and is negative in the recent fiscal year. In order to make informed decisions, Compare the company’s cash flow from operations with its reported earnings and industry peers. Significant differences might indicate aggressive accounting practices.
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Limitations of Praj Industries Ltd
An analysis is incomplete without discussing the downside of the firm. In case of Praj Industries fundamental analysis, we have already discussed a lot of favourable aspects of the company and now is the time to reflect upon few shortcomings.
Poor cash flow from Operations: With a drop in Cash Flow from Operations over the previous two years, the company has struggled to generate enough cash from its main business. The consistent decline indicates a concerning trend for the company’s financial health.
Fall in net cash flow: Additionally, at the same time period, both Net Cash Flow and Cash from Operating Activity have decreased. The company’s inability to earn enough cash at the moment to pay its costs and debts should be a cause of concern. Company’s dropping net cash flow indicates that the company’s inflows and outflows are not equal, which might result in cash shortages and unstable financial conditions.
The ability of the business to have a strong cash position and fulfil its financial obligations is put into question in such a circumstance.
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Highlights Of Earnings And Revenue For PRAJ- Annual/Quarterly
In the last year, the company’s annual revenue increased by 50.4% to reach Rs 3,563.6 Crores, while the annual net profit rose by 59.6% to Rs 239.8 Crores. However, the stock price only rose by 11.6%, underperforming its sector by 31.9% during the same period.
In the most recent quarter, the company’s quarterly revenue grew by 0.9% YoY, reaching Rs 748.8 Crores. The quarterly net profit also saw a significant increase of 42.2% YoY to Rs 58.7 Crores.
PRAJ IND earnings for the last quarter are 3.20 INR whereas the estimation was 3.65 INR which accounts for -12.33% surprise. Company revenue for the same period amounts to 7.37B INR despite the estimated figure of 8.83B INR.
BOTTOM LINE
Summing up, Praj Industries fundamental analysis. We now can summarise that the stock has a robust records of fundamentals and financials. Apart from few shortcoming, the stock is a great one.
That’s all for today’s post. Hope you get some valuable insights from here.
Happy reading!
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
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