Praj Industries Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Praj Industries Ltd (PRAJIND) Q2 FY24 Earnings Concall

• Order Book and Outlook
  • Total order book for Q2 was INR10.63 billion, with 71% from domestic market.
  • Share of order book – Bioenergy 68%, Engineering 22%, PHS 10%.
  • Backlog as of Sep 2023 stood at INR39.6 billion comprising 74% domestic orders.
  • Positive business outlook across all segments.
  • Higher execution in coming quarters can expand margins.
  • Increased top line should lead to margin expansion.
• Segment Performance
  • Bioenergy accounted for 79% of Q2 revenue, while Engineering 15% and PHS 6% of Q2 revenue.
  • International orders were 29% of total order booking in Q2 FY24.
  • Good traction in 2G ethanol, CBG plants, and biotech enzymes business.
• Export Growth
  • Praj Industries seeing increased exports, contributing 25% this quarter.
  • Drivers are low-carbon ethanol projects in the US, energy transition and climate action projects globally.
  • Positioning solutions for markets like Brazil to improve exports.
  • Seeing positive momentum for exports overall.
  • Aiming to increase export share from 20% currently to 30% plus.
  • US low carbon ethanol projects to drive growth.
• EBP 20 Program Outlook
  • Commissioning of new syrup-based ethanol plants this sugar season.
  • Increased ethanol availability expected, 850 crore liters tendered by OMCs.
  • Feedstock situation seems stable even with lower sugar production estimates.
  • Shift from rice to maize plants, but maize availability not a concern.
• CBG Order Pipeline
  • 5 CBG projects awarded but not booked due to pending clearances.
  • Seeing momentum for CBG projects from government and oil marketing companies.
  • Positive outlook for CBG segment overall.
• Employee Costs
  • Increment cycle starts in July, leading to increase in Q2.
  • Hiring employees for new GenX facility also contributed to increase.
• HiPurity Business Outlook
  • Good traction currently, more opportunities expected in semiconductor and green hydrogen.
  • Ultra high purity water needed for applications like semiconductor and green hydrogen.
  • Fermentation-based facilities being set up in India, synergies with parent company.
• H2 Execution Outlook
  • Stand by earlier comments of H2 execution being higher than H1.
  • Supply chain, manufacturing and engineering capabilities in place.
  • Don’t foresee significant impact from Q2 issues.
• GenX Business Offerings
  • Will serve energy transition/climate action markets.
  • Offerings: equipment for hydrogen, ammonia, waste-to-energy projects.
  • Key offering is modularized plant solutions for these projects.
  • Based on licensor processes but provided as modular plants.
• Margin Drivers
  • Raw material costs is major driver of margin improvement.
  • Execution volumes also contribute but raw materials dominant.
  • With current raw material prices, scope for more margin expansion.
  • Execution efficiencies can further expand margins.
• US Market Competition
  • 200 plus grain ethanol plants, 150 plus operating currently.
  • Dialogues between producers for low carbon ethanol.
  • Pipeline CCS route also an alternative but has challenges.
• Brazil Opportunity
  • Aiming for ethanol from alternative feedstocks.
  • Economy recovering post-COVID, constructive developments.
  • Praj not working on low-cost but best technology position.