Broker’s Call: Praj Industries (Sell)

Praj Industries' Q1-FY27 results underscore the disparity between the company's long-term growth prospects and its current earnings performance. Revenue rose 11.8% year-on-year to ₹720 crore, driven by bioenergy and HiPurity segments, while engineering faced a slowdown and domestic ethanol initiatives struggled due to limited greenfield projects, customer funding issues, and delayed project backlogs.

The company's African Union market share grew, yet earnings per share were low due to lower realization and margins compared to the EU and the Americas. Although PAT was up 117.3% to ₹11.6 crore, operating leverage was weak due to higher other income and reduced interest costs. Order intake rebounded to ₹1,000 crore, a 25.8% increase, fueled by international markets and new applications, with 43% of intake coming from exports, including a significant 800-klpd corn-to-ethanol order from Brazil.

However, the growth in non-core businesses is still in its infancy and has yet to compensate for the core business's weakness. Ongoing delays in projects, reduced operating leverage, and investments in GenX are expected to keep profitability under pressure in the near term. The management's absence of margin guidance further highlights the uncertainty surrounding the company's recovery timeline.

With limited visibility on the pace of recovery, the recommendation remains Sell with a target price of ₹285 based on a 27x FY28E P/E ratio.