Up 850% in 10 years! Systematix sees over 33% upside in this multibagger smallcap stock

Shares of Praj Industries jumped over per cent to hit a day's high of Rs 351.50 on BSE in Monday's trading session. Systematix Institutional Equities has initiated its coverage on Praj Industries and believes that the company is a play on the rising demand for bioenergy driven by increasing awareness of climate change and strong global mandates.

While sharing a target price of Rs 458, the brokerage noted that new opportunities are ushering in the form of ethanol blending in diesel and flex-fuel engines that essentially work with ethanol blends in excess of 20%.

"Praj Industries holds a dominant 50 per cent share in 1G ethanol, and it is the only player in 2G ethanol. The company is also scaling up its non-bioenergy business (30% of FY22 sales) by establishing a strong foothold in the modularisation business for its critical Process Equipment & Skids (CPES) segment, expanding offerings from its HiPurity business, and leveraging its multi-disciplinary engineering strengths and expertise in manufacturing to tap export opportunities," it said.

It believes Praj’s key strengths lie in its superior fundamentals, dominant market share, fast growth, and higher return profile and anticipates a further 5,100mn litres of capacity being created over the next two years, as new ethanol production capacities are set up at a fast pace. This implies 6,000mn litres of ethanol production by ESY23E, equivalent to 14% blend levels only.

As of CY22, there were 192 distilleries in the US producing 66 billion litres/year of ethanol. "We perceive PRJ will likely have an export opportunity here, going forward, as existing plants may undergo modernisation while building new ones. Many other countries are contemplating enhancing the share of biofuels in their energy mix," the brokerage added.

However, it also said that any change in government procurement policy or pricing of ethanol could have a bearing on the financial conditions of ethanol-producing companies and therefore, Praj's order book/inflows

Praj on Dalal Street

Shares of Praj Industries have delivered over 312 per cent in the last 5 years and over 850 per cent return in the last 10 years.

The stock hit a 52-week high of Rs 461.50 on October 11, 2022, and a 52-week low of Rs 289.05 on May 26, 2022. It has recovered over 19 per cent from its 52-week low.

About the company

Praj Industries is engaged in the field of bio-based technologies and engineering. It is a supplier of ethanol plants and offers sustainable solutions for bioenergy, high-purity water, critical process equipment, breweries and industrial wastewater treatment.

Also read: YES Bank shares snap two-day fall, gain ahead of 3-year lock-in expiry; SBI up for 2nd day. Here's why

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)