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Result Update: Praj Industries Ltd - REDUCE - TP Rs.108 - Kotak

Posted On: 2018-10-31 09:18:57

Praj's performance has been on an improving track. The company reported all-round good performance with revenue and profits exceeding our estimates.

Key Highlights

- The company posted robust increase in revenue despite subdued order book
- EBITDA margins expanded on a y-o-y basis due to higher revenue booking
- The management is seeing an uptick in order enquiries, which is positive as it is looked as a precursor for future order intake

Valuation and Outlook

The stock is trading at 32x and 20x, based on FY19E and FY20E earnings respectively, which in our view is leaves marginal room for upside. Praj's revenue, order book and profits have remained stagnant over the past several years. While the management is optimistic about the business outlook, we would prefer to wait until orders start trickling in on a sustainable basis. Given this, we continue to maintain our cautious stance on the company and recommend "Reduce" with revised target price of Rs 108 (earlier Rs 89, based on 20x FY20E), based on 20x FY20 earnings. We may revise our call on significant order wins in 2G ethanol. We may revise our rating upward on significant fall in stock price.

Shares of PRAJ INDUSTRIES LTD. was last trading in BSE at Rs.112.55 as compared to the previous close of Rs. 112.05. The total number of shares traded during the day was 191133 in over 1648 trades.

The stock hit an intraday high of Rs. 115.7 and intraday low of 111.1. The net turnover during the day was Rs. 21638507.

Source: Equity Bulls

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