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  • Stock Recommendation: Praj Industries Ltd - ACCUMULATE - TP Rs.89

    Publish date: 9th August, 2018

    Result Update

    Praj's performance was weak though it has improved on a y-o-y basis. The company managed to do well on margin front despite tepid revenue growth. Order intake was up ~ 100% y-o-y during the quarter.

    Key Highlights

    • The company posted modest increase in revenue due to subdued order book and slow moving orders
    • EBITDA margins were weak though it expanded on a y-o-y basis due to contraction in "other expenditure"
    • 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 25x and 19x, based on FY19E and FY20E earnings respectively, which in our view is leaves minor room for upside given the stock's weak earnings, limited revenue visibility and poor earnings track record. Given this, we maintain our cautious stance on the company, however in view of modest upside, we move rating two notches higher to "Accumulate" (Buy on decline. Earlier rating "Sell" at Rs.96). Retain target price of Rs 89, based on 20x FY20 earnings.


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