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Report By: Surbhi Bagaria – [email protected]

Source: Company, www.dynamiclevels.com

Praj Industries Ltd- Integrating Transformation

Praj Industries Ltd 3

Business Lines 4

Subsidiaries 5

Praj Around the world 6

Emerging Business 7

Company Financials 8

Shareholding Pattern 12

Industry Outlook 13

Key Developments 14

Praj Valuation & Investment Rationale 16


Praj Industries Ltd.

Praj is a global process solutions company driven by innovation and integration capabilities, offers solutions to add significant value to bio-ethanol facilities, brewery plants, water & wastewater treatment systems, critical process equipment & systems, HiPurity solutions and bio-products. Over the past 3 decades, Praj has focused on environment, energy and agri process led applications. Praj has been a trusted partner for process engineering, plant & critical equipment and systems with over 600 references across five continents. Solutions offered by Praj are backed by its state of the art R&D Centre called Matrix.

Dynamic Levels is positive on the prospects on Praj as:

The consolidated order backlog as on March 31, 2016 stood at Rs. 960 crore which comprised of 40% international orders.

Ethanol blending in India reached 3.2% in the year 2015-16. OMCs have finalized contracts to procure 1.3 bn liter (equivalent to 5%) for the first time since the mandate is in place.

Lok Sabha has passed the Industries (Development and Regulation) Amendment Bill, which transfers the control of beverage and industrial alcohol to the states; whereas fuel ethanol will be a central government subject. This is a positive movement for ethanol blending program.

Praj commissioned a 200 m 3 /day multi-product plant based on the novel Ecosmart technology in Poland. It is capable of reducing water and steam consumption by upto 40%.

Water and waste water treatment group recently commissioned zero liquid discharge ETP for a yarn manufacturing facility of one of the largest textile companies in Central India.

Praj Share Price Performance

EXCHANGE SYMBOL PRAJ INDUSTRIES

Current Price * (Rs.) 87.85 Face Value (Rs.) 2 52 Week High (Rs.) 117.00 52 Week Low (Rs.) 68.80 Life Time high (Rs.) 272.95 Life Time low (Rs.) 0.15 ADM 4.39 Average Volume 733556 1 Month Return (%) -6.09 P/E Ratio (x) 22.97 Book Value 34.95 Market Cap 1605.94 (Cr) % of Promoter holding pledged 0

CMP Rs 87.85 Target: 97 FY16P/E: 22.97

COMPANY PROFILE OF PRAJ

Date of Incorporation 08-Nov-1985

Date of Listing 22-May-1995

Management

Name Designation

Pramod Chaudhari Executive Chairman

Gajanan Nabar MD & CEO

Berjis Desai Non ED

Daljit Mirchandani Non ED

Sivaramakrishnan S Iyer Non ED

Parimal Chaudhari Non ED

Kishor Chaukar Non ED

Prakash Kulkarni Non ED

Rajiv Maliwal Non ED

Registered Office Address

"Praj Tower", S.No. 274 & 275/2, Bhumkar Chowk-Hinjewadi

Road,Hinjewadi,411057,Pune,India Website

http://www.praj.net


Business Lines:

What started off as an entrepreneurial venture 3 decades ago is

considered to be India’s most successful biofuels Company, taking

biobased technologies from India to the World. Today, Praj offers

innovative solutions for beverage alcohol and bioethanol plant,

brewery, water & wastewater treatment plant, critical process

equipment and systems and bioproducts.

A globally leading Company with presence in more than 60 countries

across 5 continents, Praj has acquired an international repute for

responsible and reliable solutions.

The business verticals of Praj are defined along 5 blocks:

Ethanol & Brewery Plants:

Praj enjoys an unique position in the world of ethanol technology by

virtue of its expertise which cuts across a variety of sugar to starch

based feedstocks. Praj provides holistic solutions for various grades of

ethanol (beverage, fuel, industrial, pharma and perfumery) and

brewery plants encompassing range of technologies and systems for

water & wastewater management.

Water & Wastewater Treatment Plants:

Praj offers integrated water & wastewater treatment systems and has

already made a beginning in the industrial sector with a wide range of

solutions. This vertical addresses industrial applications for high quality

water, complex effluent treatment including recycle, reuse and zero

liquid discharge plants.

Critical Process Equipment System:

This vertical serves a wider sectoral requirement for high end

equipment & systems finding application in the oil & gas,

petrochemical, fertilizer, chemicals industry. India is emerging as a

sourcing hub for engineered products, especially those which have a

level of criticality in terms of material of construction, complexity of

fabrication and standards & codes to be followed. Praj has

demonstrated capabilities wherein it supplies critical process

equipment & systems to a number of domestic and global players.


High Purity Systems:

Addressing the pharmaceutical, biotech and F & B sector, Praj acquired

Neela Systems (now Praj Hipurity Systems), a Company engaged in

providing hi purity water and hygienic systems to the pharma industry.

Praj plans to extend its footprints in the hygienic engineering and

systems business. It has the capability of providing end-to-end

solutions for the pharma, biotech, food & beverage sector. This will be

an area of special focus where Praj will deploy combined experience of

Neela and Praj

BioProducts:

Praj recently announced its entry into the biotech products business

with launch of its livestock feed health & nutrition business. Other than

this, Praj is also working with biochemicals and human health &

nutrition products which are presently in different stages of

development.

The backbone of Praj’s technology development is Praj Matrix, the

Innovation Center. Praj Matrix is working on bioethanol and

biochemicals processes.

Subsidiaries:


Praj Around the world:

Praj has been a trusted partner to customers around the world since the last 3 decades for innovative, sustainable solutions in ethanol, brewery and Water & Wastewater Treatment Systems, process equipment and bio-products like distillery bio-consumables. South America: Colombia: Partners in fuel ethanol program Colombia's fuel ethanol program was launched in 2002 when the government passed a law mandating use of fuel ethanol in gasoline. Praj is very proud to be associated with the fuel ethanol programme of Colombia by way of installing ethanol production plants. These plants serve as a benchmark in the entire South American continent. Europe: Largest Bioethanol plant commissioned in UK Praj has completed a decade in Europe with more than 20 references. Praj has commissioned the 2nd largest bioethanol plant in UK for Vivergo Fuels which has a capacity of 420 million litres per annum. Since 2006, an increasing share of bioethanol is used in gasoline in EU. Praj works with marquee customers within EU. Praj has supplied technology and proprietary equipment to fuel and beverage ethanol plants in UK, Poland, Belgium, Hungary, Germany, Bulgaria, etc

South East Asia: Glorious 20 years and many more to come South East Asia has served as a beachhead for Praj in the international market. Praj entered the South east Asian market in 1992 and the 1st plant of 120 Kilo Litres per day was commissioned in 1994 at Lawang, Indonesia. Since then Praj has installed more than 40 plants, holding a market share of more than 60%. Praj has supplied plants in Thailand, Indonesia, Philippines, Australia, Cambodia, Vietnam and Japan. The predominant feedstock for bioethanol in SEA is Cassava, Cane Molasses & Cane juice. Thailand has implemented its biofuels program successfully and phased out premium gasoline with ‘gasohol’. Philippines has mandated 10% ethanol blending, while Australia has a 2% mandate for blending. Japan imports ethanol for production of ETBE. Vietnam has also installed facilities for blending. Africa: Africa Is Regarded As One Of The World’s Latest In Emerging Economies Praj Has Been a Part Of This Upbeat Economy For More Than a Decade. With its Plants in Ethiopia, Kenya, Tanzania, Nigeria, Zimbabwe, Sierra Leone, Swaziland, Mozambique, Malawi, South Africa, Praj Enjoys a Sizable Share Of The Production Plants In Africa. Praj Takes Great Pride To Be Associated With Clients Like Illovo- The Largest Ethanol Producer In South Africa, Addax, Royal Swaziland Sugar Corporation, Agro Chemical And Food Company, Etc.

PRAJ serves as a benchmark in

the entire South American

continent


Emerging Business:

Critical Process Equipment:

Critical process Equipment and Systems (CPES) business leverages

Praj's Process Engineering and Manufacturing Capabilities. Since then,

Praj has committed dedicated resources in terms of engineering and

manufacturing facilities at 3 locations for fabrication of high thick

materials like carbon steel¸ other higher alloys along with stainless

steel & cladded equipment. All the facilities are ISO 9001: 2008, ASME-

U/ U2 and CE Marking certified. Facilities also have IBR, CCOE, NB, ISO

14001 and OHSAS 18001 certifications.

Praj provides critical process equipment & systems to various sectors

like chemical, oil & gas, petrochemical, fertilizer, pharma & biotech,

food & beverage etc to clients globally. Praj follows international

design codes like ASME Section VIII – Div 1 & Div 2, PED, TEMA, BS

5500, API 650 and AD-Merkblatter. It also supplies in accordance with

country specific requirements like IBR, DOSH, GOST (TR), MOM,

UkrSEPRO, AS etc. Praj has served clients in India, Singapore,

Malaysia, Germany, Russia, Ukraine, Fiji, Oman, Saudi Arabia and

Italy.

Praj has successfully worked with various esteemed EPC partners like

LINDE, Uhde, Saipem, Toyo Engineering, SNC Lavalin, Aker Solutions,

Jacobs, Fluor, Lurgi etc.

Some of its valued customers globally are GE Oil & Gas, Bayer,

Lanxess, BASF, DOW, SRF, Lupin, Biocon (Malaysia), Cargill etc.

Water and Wastewater Treatment Solutions

Water and waste water treatment business has its origin in Praj's

understanding of challenging distillery effluent.

This business line rests on the three pillars of -

Quality of water

Complexity of Effluent

Reduce, Recycle, Reuse and ZLD

CETP at Thirupur textile belt is a noteworthy example. The industries Praj serves are - textiles, pharmaceuticals, food and beverages, power. Some of our valued customers are Lucky Spinning (Thailand), Torrent Pharma and many more.

Some of its valued customers globally

are GE Oil & Gas, Bayer, Lanxess, BASF,

DOW, SRF, Lupin, Biocon(Malaysia),

Cargill etc.

Praj has served clients in India,

Singapore, Malaysia, Germany, Russia,

Ukraine, Fiji, Oman, Saudi Arabia, and

Italy.


Company Financials:

Income Statement (in Cr) FY 2015 FY 2016 % Growth

Net Sales/Income from operations

1,011.85 1,014.13 0.23%

Other Operating Income -- 1.67

Total Income From Operations 1,011.85 1,015.80 0.39%

Increase/Decrease in Stocks 21.55 -0.22

Consumption of Raw Materials 484.41 467.19 -3.55%

Employees Cost 133.12 151.4 13.73%

Depreciation 37.83 34.45

Other Expenses 280.11 286.55

Total Expenditure 957.02 939.37 -1.84%

Operating Profit 54.83 76.43 39.39%

Other Income 34.02 14.57 -57.17%

P/L Before Int., Excpt. Items & Tax 88.85 91

Interest 2.47 1.31 -46.96%

P/L Before Exceptional Items & Tax

86.38 89.69

P/L Before Tax 86.38 89.69

Tax 18.69 20.31

P/L After Tax from Ordinary Activities

67.69 69.38

PAT 78.23* 69.46 -11.21%

Minority Interest -1.96 -0.01

Net Profit/(Loss) For the Period 76.27 69.45 -8.94%

Prior Year Adjustments 10.54 0.08

Equity Share Capital 35.49 35.59

Reserves 586.67 625.51 6.62%

EPS (Rs.) 4.3 3.91 -9.07%

WACC FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

Equity

Cost of Equity 11.5% 10.7% 11.6% 10.6% 11.8%

Weight of Equity

98.5% 97.9% 97.8% 98.5% 99.0%

Debt

Cost of Debt 6.6% 8.3% 8.6% 9.8% 7.5%

Weight of Debt

1.5% 2.1% 2.2% 1.5% 1.0%

WACC 11.4% 10.7% 11.5% 10.6% 11.7%

--

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

FY 2

01

2

FY 2

01

3

FY 2

01

4

FY 2

01

5

FY 2

01

6

Cost of Equity

Weight of Equity

Cost of Debt

Weight of Debt

Income Statement Analysis:

1. In FY 16 the Praj maintained its topline at par compared to last year but reduced the expenditure by 1.84% inspite of increase in Employee cost

2. Other Income increased by 40%

3. FY15 PAT includes Rs 11.9 crore (pre-tax) capital gain on sale of office building at Bavdhan, Pune and write back of Rs 10.76 crore towards excess provision for tax

4. Reserves of the company have gone up by 6.62%.

5. PAT down by 11.2%

Note – all figures on consolidated basis, i.e. Praj Industries India, its local execution companies and subsidiaries.


Balance Sheet (In Mn) FY 2014 FY 2015 FY 2016

ASSETS

Cash And Equivalents 240.9 755.0 818.5

Short Term Investments 1,183.2 1,714.8 1,159.5

Total Cash & ST Investments 1,424.0 2,469.8 1,978.0

Accounts & Notes Receivable 3,202.7 2,804.8 3,671.0

Total Receivables 3,202.7 2,804.8 3,671.0

Inventories 1,222.1 976.1 1,822.0

Prepaid Exp. 998.5 1,295.4 -

Restricted Cash 8.6 9.0 -

Other Current Assets 2,368.7 1,303.5 694.1

Total Current Assets 9,224.5 8,858.6 8,165.1

Net Property, Plant & Equipment 2,642.6 2,382.2 2,231.8

Long-term Investments 50.1 100.1 293.3

Deferred Charges, LT 17.4 20.9 -

Other Long-Term Assets 823.2 794.3 925.9

Total Assets 12,757.7 12,156.1 11,616.1

LIABILITIES

Short-term Borrowings 211.8 170.7 159.1

Accounts Payable 1,998.2 1,772.4 2,071.5

Curr. Income Taxes Payable 1,550.3 745.8 -

Other Current Liabilities 2,763.8 2,966.1 2,640.3

Total Current Liabilities 6,524.2 5,655.0 4,870.9

Long-Term Debt 1.5 2.0 1.2

Other Non-Current Liabilities 192.8 129.1 130.2

Total Liabilities 6,718.5 5,786.1 5,002.3

Minority Interest 214.0 148.4 2.8

Additional Paid In Capital 924.9 924.9 355.9

Comprehensive Inc. and Other 4,900.3 5,296.6 6,255.1

Total Common Equity 6,039.2 6,370.0 6,613.8

Total Equity 6,039.2 6,370.0 6,613.8

Total Liabilities And Equity 12,757.7 12,156.1 11,616.1

Book Value/Share 32.8 35.1 37.2

Balance Sheet Analysis

Company’s long term

investment has increased

from 100 Mn to 293 Mn

in 2 years.

Praj has reduced its short

term borrowings

Praj has reduced its long

term debt by 430% from

2 to 1.2 Mn

Book value has increased

from by 10% from 35.1 to

37.2 per share

Total liabilities is

decreasing YoY from

6718 in FY14 to 5002 in

FY16


Cash Flow ( In Mn) FY 2013 FY 2014 FY 2015

Net Profit/Loss Before Extraordinary Items And Tax

80.72 78.44 68.16

Net CashFlow From Operating Activities 20.27 27.22 141.18

Net Cash Used In Investing Activities 21.16 16.07 -72.87

Net Cash Used From Financing Activities -48.88 -46.32 -33.88

Foreign Exchange Gains / Losses 0.87 0.81 0

Net Inc/Dec In Cash And Cash Equivalents -6.57 -2.21 34.43

Cash And Cash Equivalents Begin of Year

33.79 27.22 28.37

Cash And Cash Equivalents End Of Year

27.22 25 62.8

Capital Structure FY 2014 FY 2015 FY 2016

Millions % of Total Millions % of Total

Millions % of Total

Market Cap 9,316.9 97.8% 11,073.8 98.5% 15,873.1 99.0%

ST Borrowings 211.8 2.2% 170.7 1.5% 159.1 1.0%

LT Borrowings 1.5 0.0% 2.0 0.0% 1.2 0.0%

Pref Equity 0.0 0.0% 0.0 0.0% 0.0 0.0%

Total Capital 9,530.2 100.0% 11,246.5 100.0% 16,033.4 100.0%

Key Financials FY 2014 FY 2015 FY 2016

Total Revenue 9,858.4 10,118.5 10,141.3

Growth Over Prior Year 7.3% 2.6% 0.2%

EBITDA 861.6 844.1 1,098.6

Margin % 8.7% 8.3% 10.8%

EBIT 624.0 465.8 754.1

Margin % 6.3% 4.6% 7.4%

Net Income 546.3 762.7 694.5

Margin % 5.5% 7.5% 6.8%

Diluted EPS Excl. Extra Items 3.08 4.29 3.88

Growth Over Prior Year (19.6%) 39.3% (9.6%)


Ratios FY 2014

FY 2015

FY 2016

Profitability

Return on Assets 4.3% 6.1% 5.8%

Return on Capital 9.3% 12.6% 10.6%

Return on Equity 9.5% 12.7% 10.8%

Margin Analysis

EBITDA Margin 8.7% 8.3% 10.8%

EBIT Margin 6.3% 4.6% 7.4%

Earnings from Cont. Ops Margin

6.3% 4.6% 7.4%

Net Income Margin 5.5% 7.5% 6.8%

Normalized Net Income Margin

5.5% 7.5% 6.8%

Free Cash Flow Margin -4.7% 13.9% --

Asset Turnover

Total Asset Turnover 0.8x 0.8x 0.9x

Fixed Asset Turnover 3.8x 4.0x 4.4x

Accounts Receivable Turnover

3.1x 3.4x 3.1x

Short Term Liquidity

Current Ratio 1.4x 1.6x 1.7x

Quick Ratio 0.7x 0.9x 1.2x

Cash from Ops. To Curr Liab

0.2x 0.4x 0.4x

Avg. Days Sales Out. 117.7x 108.4x 116.9x

Long Term Solvency

Total Debt/Equity 3.5% 2.7% 2.4%

Total Debt/Capital 3.4% 2.6% 2.4%

LT Debt/Equity 0.0% 0.0% 0.0%

LT Debt/Capital 0.0% 0.0% 0.0%

Total Liabilities/Total Assets

1.5% 1.1% 1.1%

EBIT / Interest Exp. 43.35x 18.88x 57.56x

EBITDA / Interest Exp. 59.86x 34.21x 83.86x

Total Debt/EBITDA 0.25x 0.20x 0.15x

Net Debt/EBITDA -1.41x -2.72x -1.65x

Ratio Analysis:

Profitability ratios indicate that Praj Returns have

improved YoY, indicating that the management is

efficiently using its assets to generate earnings and Praj

is able to generate good return with the money

shareholders have invested

EBITDA margins have improved which is an indication the

revenue that is left with the Company after it has

deducted all the expenses has increased YoY.

Asset Turnover ratio indicates that Co is efficiently

deploying its assets to generate the revenue.

Co’s Short term liquidity has improved but it is not able to

meet the industry standards of minimum 2, which

signifies that the Company might have liquidity problems

in paying its short term debt on time.

Praj has high Debt which has decreased YoY, it is a

positive sign as it is reducing its debt


Shareholding Pattern

Shareholding Pattern Mar-16 Dec-15 Sep-15 Jun-15 Mar-15

Promoter and Promoter Group (%) 33.88 33.90 33.90 33.98 33.98

Indian 33.88 33.90 33.90 33.98 33.98

Foreign NIL NIL NIL NIL NIL

Institutions (%) 25.94 24.87 27.17 25.33 22.92

FII 6.21 0.72 8.19 7.11 7.45

DII 19.73 24.15 18.98 18.22 15.47

NonInstitutions (%) 40.18 41.23 38.94 40.69 43.10

Bodies Corporate NIL NIL 11.62 12.20 12.55

Others 40.18 41.23 27.31 28.49 30.56

Custodians NIL NIL NIL NIL NIL

Total no. of shares (cr.) 17.80 17.79 17.79 17.75 17.75

FII’s have increased their stake in FY16 from 0.72 to 6.21 but DII has decreased from 24.15 to 19.73

Persons holding securities more than 1% of total number of shares under category Public Shareholding.

Category Mar-16 Dec-15 Sep-15 Jun-15 Mar-15

Parimal Chaudhari Promoters 12.14 12.14 12.14 12.17 12.17

Pramod Chaudhari Promoters 21.74 21.75 21.75 21.81 21.81

Bodies Corporate NonPromoters 12.3 12.43 NIL NIL NIL

Canara Robeco Mutual Fund A/c Canara Robeco Emerging Equities

NonPromoters NIL NIL 1.67 1.24 NIL

Foreign Individuals or NRI NonPromoters 2.75 NIL NIL NIL NIL

Government Pension Fund Global NonPromoters NIL NIL 2.09 2.09 2.09

Hdfc Trustee Company Limited-Hdfc Equity Fund

NonPromoters 8.97 8.98 8.98 9 9

IDFC Infrastructure Fund NonPromoters NIL NIL 1.01 NIL NIL

Lic Of India Market Plus 1 Growth Fund NonPromoters 2.85 2.85 3.22 3.96 4.01

Sundaram Mutual Fund A/C Sundaram Smile Fund

NonPromoters 2.05 2.05 3.5 2.43 NIL

Tata Capital Financial Services Ltd NonPromoters NIL 7.55 7.55 7.56 7.56

Vinod Khosla NonPromoters 1.61 1.61 1.61 1.61 1.61

Promoters of PRAJ have kept their investment constant throughout the year


Industry outlook:

Inflow of foreign investments

Cumulative FDI inflows increased to US$ 26.3 billion in FY16* from US$ 8.9 billion in FY10.

The government’s increasing focus on attracting foreign investors in manufacturing and infrastructure is likely to boost FDI in the sector.

• FDI inflows includes Automobile industry, Electrical equipment, Miscellaneous mechanical and engineering industry, Industrial machinery, Machine tools, Agriculture machinery, Earth-moving machinery and Industrial instrument

Key categories of exports

Transport equipment (which includes Auto & auto component including Aircraft and ship boats) is the leading contributor to engineering exports accountingfor 34.5 per cent of the total engineering exports in FY 15.

Iron & Steel and products made of Iron & Steel have accounted around 22.9 per cent market share while industrial machinery including electrical machinery accounted 21.9 per cent of the total engineering exports in FY15.

Others commodities includes Medical and Scientific instruments, Hand tools & Cutting tools, Bicycle parts, Office equipments, Prime Mica & Mica Products etc. accounted 8.7 per cent of the total engineering exports in FY15.

Market size The capital goods & engineering turnover in India is expected to reach US$ 125.4 billion by FY17. Engineering exports from India in FY 2014-15 stood at US$ 70.7 billion registering a growth of 14.6 per cent over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise. India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports. Recently, India's engineering exports to Japan and South Korea have also increased with shipments to these two countries rising by 16 and 60 per cent respectively.

Government Initiative

The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100 per cent FDI. With the aim to boost the manufacturing sector, the government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles. It has also reduced the basic customs duty from 10 per cent to 5 per cent on forged steel

rings.


Key Development

Stable performance in the midst of volatile macro-economic external environment and sombre international markets – a result of transformation efforts Key imperative lies in leveraging established core businesses across geographies and scaling up emerging businesses Rigor in operational excellence reflected in operating profit. Ethanol business – Positive ecosystem in creation in India

Ethanol blending reaches 3.2% in India in the year 2015-16

OMCs have finalized contracts for 1.3 bn liter ethanol for the coming year (equivalent to 5% blending) - first time since the mandate is in place

Lok Sabha passes the Industries (Development and Regulation) Amendment Bill - fuel ethanol becomes a central government subject, facilitates inter-state transport of fuel ethanol

Prohibition of beverage alcohol in Bihar – OMCs asked to maximize fuel ethanol procurement from Bihar, will compensate for reduction in ethanol production from drought affected states

Global ethanol markets developments

Argentina increases blending mandate from 10 to 12%, plans to go for 20% by 2019 and eventually to 26%, will need 1.75 bn liter additional capacity

Queensland, Australia passes bill for 3% blending

Thailand exploring cassava feedstock to combat drought situation, with 20% blending, ethanol requirement will increase from the current 3.5 mn daily

Mexico working on blending program

Brewery business

Consolidation among global brewers, structural changes in the market place, more brown-field capacity build-outs

Division of Andhra Pradesh and Telangana creates opportunities for green-field capacities in Andhra due to separate tax and excise regime of the two states

Internationalization program being pursued in select geographies


Praj HiPurity Systems

Government set to propel pharma industry to the next level of innovation – positive for Praj Hipurity

Indian pharma industry gearing up for biosimilars

Internationalization of PHS on track Critical process equipment & systems

India set to move to Bharat VI, Indian refineries to invest of Rs 40,000 crore

Petrobras order continues to be dormant, update after a quarter (Q2 FY 17)

Commissioning of ethanol plant based on Ecosmart technology in Europe

200 m3/day ethanol plant in Poland

Upto 40% energy and water reduction

Water and waste water treatment team commissions multiple effect evaporation and ATFD based zero liquid discharge ETP for yarn manufacturing facility of one of the largest textile companies in India


Praj Valuations & Investment Rationale

An improving trend visible over the last few years due to Internationalization of Brewery and Emerging Businesses, particularly HiPurity Systems and Environment Business of Water & Wastewater Treatment Systems; Harnessing the existing base of Ethanol/Alcohol Plants through modernization and retrofit solutions; Enhancing the wallet share of HiPurity Systems business and adding value added services across businesses for recurring revenue. Effort is on-going to maximize value through intake of better quality orders; following more stringent commercial and financial discipline; incorporate excellence in all aspects of project/services delivery to enhance customer value. Recently, Praj acquired 20% stake for INR350mn in Praj HiPurity Systems and made it a wholly‐owned subsidiary.

Praj has diversified its revenue base over the past four‐five years and entered new zones like critical process. equipment, waste water, Neela.

Led by global references and ethanol blending mandates in key export regions like US, Brazil, Columbia, Peru, Thailand, Malaysia etc, Praj has strong presence in the global ethanol market. Its brewery business recently bagged 2 large projects overseas.

It has been able to reduce project cost YoY

Praj has been catering to needs of industries like textile and tannery that have been served notices to pursue technology‐intensive, value‐accretive business. The company is eyeing tie‐ups with EPC projects for industrial waste water orders.

Management expects strong traction in ethanol equipment ordering from Argentina, Columbia, Peru, etc., led by higher mandates in respective countries.

Around 15% of global ethanol market globally is non‐fuel based which is prime market for PRAJ.

Management expects investments in gas and downstream processing to continue inspite of oil sector facing challenges in terms of low crude prices.

We initiate coverage on Cosmo Films Ltd as a BUY @320-340 with a target of Rs 450 representing a potential

upside of 30% from the buy price. COSMO FILMS is trading at a low PE of 8.9. We are positive on the company

prospects due to:

We initiate coverage on Praj Industries Ltd as a BUY @82-83 with a target of Rs 97 representing a potential

upside of 20% from the buy price Praj is trading at a PE of 27.

We are positive on the company prospects as Praj expects to improve its order book and improve its EBITDA

margins in the years to come. It also expects Internationalization of Brewery and Emerging Businesses,

significant growth in MPS (model process business) in pharmaceutical and biotech and this is on the back of

biosimilars. Also exports of Praj HiPurity business which is again focused on pharmaceuticals and biotech, is

seeing growth potential. So, there are couple of businesses in which Praj expects growth in future.

https://www.dynamiclevels.com/en/cosmo-films-share-price-forecast

https://www.dynamiclevels.com/en/praj-industries-share-price-forecast


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DYANMIC/its Associates/ Research Analyst/ his Relative have any financial interest in the subject company? No

DYANMIC/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject company? No

DYANMIC/its Associates/ Research Analyst/ his Relative have any other material conflict of interest at the time of publication of the research report or at the time of public appearance? No

DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation from the subject company in the past twelve months? No

DYANMIC/its Associates/ Research Analyst/ his Relative have managed or co-managed public offering of securities for the subject company in the past twelve months? No

DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months? No

DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months? No

DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation or other benefits from the Subject Company or third party in connection with the research report? No

DYANMIC/its Associates/ Research Analyst/ his Relative have served as an officer, director or employee of the subject company? No

DYANMIC/its Associates/ Research Analyst/ his Relative have been engaged in market making activity for the subject company? No

General Disclaimer: - This Research Report (hereinafter called “Report”) is meant solely for use by the recipient and is not for circulation. This Report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security through Dynamic nor any solicitation or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security (ies) referred to herein. These information / opinions / views are not meant to serve as a professional investment guide for the readers. No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or making any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by Dynamic to be reliable. Dynamic or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of the directors, employees, affiliates or representatives of Dynamic shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including loss profits arising in any way whatsoever from the information / opinions / views contained in this Report. The price and value of the investments referred to in this Report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Dynamic levels do not provide tax advice to its clients, and all investors are strongly advised to consult with their tax advisers regarding taxation aspects of any potential investment. Opinions expressed are our current opinions as of the date appearing on this Research only. We do not undertake to advise you as to any change of our views expressed in this Report. User should keep this risk in mind and not hold dynamic levels, its employees and associates responsible for any losses, damages of any type whatsoever. Dynamic and its associates or employees may; (a) from time to time, have long or short positions in, and buy or sell the investments in/ security of company (ies) mentioned herein and it may not be construed as potential conflict of interest with respect to any recommendation and related information and opinions. Without limiting any of the foregoing, in no event shall Dynamic and its associates or employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind. We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor to such company (ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of Research Report. Dynamic may have proprietary long/short position in the above mentioned scrip(s) and therefore may be considered as interested. The views provided herein are general in nature and does not consider risk appetite or investment objective of particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with Dynamic. Dynamic Equities Pvt. Ltd. are also engaged in Proprietary Trading apart from Client Business.

https://www.dynamiclevels.com/en/disclaimer

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