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.