Praj Industries Complete Analysis:
Praj Industries is bringing the Industry revolution in introducing the Bio fuels to the world and providing eco friendly solutions.
Now we are everyone worrying about Global warming and the environmental changes those were happening because of huge pollution in water, Air and in Sound everywhere the humans and the thing which are making human life luxury and simple like personal vehicles, and the factories which are contributing more to the pollution. So now everyone is looking for the alternate sources of energy and fuels like Solar, Wind and Electric.
The coming next generations will majorly depends on these kind of things. Here we need to observe the big opportunity that comes from Bio Economy. Bio Economy Is the future. So we need to understand this revolutionary Industry and that is the way we will get benefited in advance by investing earlier.
There is a company in India that is going to be participate in this revolution of Bio Economy named Praj Industries Limited.
Business Model & Positives of Praj Industries:
This company has five major business segments, those are Bio energy, High Purity Systems, Critical Process equipment and systems, Brewery Plants and Waste water treatment. Among these Bio energy is the most important business segment and it has the potential to make this company as Multi bagger.
Bio Energy :
In this business segment company manufactures several Bio efficient products like Ethanol, Bio Diesel, Bio Jet fuel and many more. Now will discuss about Ethanol Blending which is currently driving the company in more positive direction. As high demand occurring to the crude across the world now the every country is looking to blend the ethanol into crude as well in India.
As currently India blending only 5%, but the target that India has is 20%. So that now we can understand that company has 4X business opportunity as Praj Industries is the Market leader in Ethanol production with 75% market share.
Ethanol :
Normally every company produces ethanol from sugar canes extract, but the company Praj Industries found the technology that helps to produce the Ethanol from the wastage of Crops and Broken and spoiled Grains.
This technology helping not only to produce Ethanol but also in decreasing pollution in Capital city Delhi as the only three surrounding states like Haryana, Punjab and Chandigarh are producing 20 Metric tones of crop wastage and the farmers are burning the crop wastage as it causes for big pollution in Capital city Delhi.
By using this technology the well known oil marketing companies such as HPCL and BPCL are producing Ethanol. If this acceptance for 2nd generation technology of Ethanol production continues then it becomes big opportunity for this company.
As government decided to reach 20% ethanol blending in fossil fuels by 2025, the capacity of production should be 1000cr liter’s as it is currently at 350cr litres.
This is the again big opportunity for this company as the industry has big scope for industry growth. And the government has taking several helpful decisions to achieve their target of 20% Ethanol blending by 2025, like provided permissions to extract the ethanol directly from Sugarcane as it is from only molasses C earlier. And by bringing Ethanol into the GST, govt given solution for tax problems which comes from transportation of sugar cane, as sugar canes main producers are Maharashtra and Madhya Pradesh.
The government has benn introduced the escrow mechanism among the banks, sugar companies and the oil marketing companies to increase the capacities of sugar companies as they had weak balance sheets,
So that banks will come forward to lend the money to the sugar companies to increase their capacities. Again it would be the positive for ethanol producers and here we can understand the government is very serious about achieving their target of 20% ethanol blending by 2025. Another key driving factor for Praj Industries.
Also government of india introduced the subsidy scheme and 5 year purchase program which initially 6 months program.
Compressed Bio Gas :
By introducing SATAT yojana Government of India wants to convert the Agricultural wastage, food wastage and other wastage into productive by producing Bio Gas, this gas will be distributed by HPCL, BPCL and GAIL in cities as well in vehicles. This would be another big positive for Praj Industries as they already had the technology that convers the wastage into compressed Bio Gas.
Bio Jet Fuel :
Praj Industries also working on Bio Jet Fuel which would be used in Aircrafts as already Indian government has been given the permission to produce Bio Jet fuel.
Also this company working on Bio Marine Fuel which can reduces the pollution in sea and also working on Bio Diesel. These all are big opportunities for the Praj Industries as pollution free technologies they are developing and there is high demand for everything they are doing and all the positive things we have discussed from the only Bio Energy business segment.
High Purity Systems :
High purity systems which can be produces the high purity water that can be used in Pharma sector. This high purity water also can be used in manufacturing APIs. As API industry is growing continuously we can see it as big positive for Praj Industries. High purity water is also using by fermentation chemicals companies as already Praj is working with the global fermentation chemicals company Novozymes.
Critical Process and Equipment Systems :
This division also called as CPES. This division manufactures the key equipments those can be used in Oil and Gas refineries, Petro chemical industry, Fertilizer industry and chemical industry.
Brewery Plants :
This division offers technological solutions, supplies key equippments and 24X7 after sales service support. This company is the market leader in breweries industry as this company is holding more than 70% market share. Almost every big company in brewery industry is the client of Praj including Heinken, Carlsberg, ABinBev, United Breweries and many more.
Industrial waste water treatment :
In this segment major steel companies, Dairy, Pharmaceutical, Power companies, food and beverages, Textile and Chemical companies are the clients of this company.
And also the research team of Praj is working on so many eco friendly technologies and applied for more than 130+ patents across the world. Almost the company is the part of building eco friendly nation.
Financials of Praj industries:
Almost in every financial parameter company is showing steady growth from last 10 years as they invested time and money to build the base now its time to grow and provide solutions to the world. This company is the debt free company though it is a heavy engineering company, we can see it as positive.
If you look at the revenue breakup, the company is generating 68% of revenues from Bio Energy, 20% of revenues from Engirneering Segment and 12% revenues from High purity systems.
If look at the revenue sources they are generating 71% of revenues from domestic market and 29% of revenues from global markets by exporting. The company has 1900 crore orderbook in their pocket.
Key Risks & Challenges to Praj Industries:
As this company is highly dependent on government policies, policies may impact the company. It is one of the biggest risk.
If any adverse impacts found in the vehicles caused by Ethanol, this company may get affected severely.
As already MNCs are trying to enter into the ethanol market, Praj may face competition.
Conclusion :
Personally I am very bullish on this company Praj Industries as this firm has lot of scope to grow as everyone looking for eco friendly systems. And the company receiving great acceptance for 2g, high purity systems and other engineering technologies driving this company positively.
These all things contributing high growth in sales and now they are getting benefitted from the work they did in R and D from last 15 years. Before investing into this company also consider the key risks we have discussed. As we are looking for long term, we can accumulate this Stock in every dip.
Disclaimer : The conclusion on any company is purely depends on personal view. Before investing into any company please do your own research else take an advise from your financial advisor.