Result Update: Praj Industries Ltd - REDUCE - TP Rs.73 - Kotak

- Praj reported weak first quarter performance (largely expected), which missed our estimates on revenue and profit front. Order intake was also weak, consequently, the order book has declined further at the end of the quarter. The outlook for ethanol business has been further clouded by the tax changes post the implementation of GST on ethanol and molasses. The management indicated that the sugar/ethanol industry is making representation to the government for revising the GST rates on ethanol and molasses.

- The stock is trading at 26.5x and 19.4x, based on FY18 and FY19 earnings respectively, which in our view is fair given the stock's weak earnings and business outlook.

- Further, we note that there is reasonable chance of the company missing on our projected earnings. Given this, we continue to maintain our cautious stance on the company and maintain "REDUCE" with a revised target price of Rs 73 (Rs 81 earlier), based on 20x FY19 earnings.

- We may revise our call if 1) the Petrobras order which has been stalled, is again revived and 2) there is movement on 2G ethanol projects

Shares of PRAJ INDUSTRIES LTD. was last trading in BSE at Rs.68.75 as compared to the previous close of Rs. 70.15. The total number of shares traded during the day was 38613 in over 304 trades.

The stock hit an intraday high of Rs. 69.65 and intraday low of 68.35. The net turnover during the day was Rs. 2659833.

Source : Equity Bulls

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