Praj Ind share price jumps 2% as government lowers GST on ethanol

The stock opened at ₹375.10 on BSE and further jumped to hit an intraday high of ₹391.40. At the time of writing this copy, the share price was at ₹377.7, up 1.9% from previous day’s close of ₹370.

It is still about 18% away from its 52-week high of ₹461.50, which it hit on October 11, 2022.

Under the government’s Ethanol Blended Petrol (EBP) Programme, oil marketing companies (OMCs) sell petrol blended with ethanol up to 10% and mandate to increase it to 20% by 2025.

Brokerage house Prabhudas Lilladher in its latest report said that the announcement will bode well for ethanol manufacturers and ethanol plant manufacturers such as Praj Industries while assigning the stock a buy rating.

The brokerage feels that the company has a leadership in domestic market and the business is well-diversified too.

“We remain positive on Praj given 1) its strong leadership in domestic ethanol plants (~60-65% market share), 2) global presence (+100 countries) 3) focus on future-ready technologies like 2G plants, Compressed Bio Gas (CBG) and 4) diversification in Wastewater Treatment (ZLD), Critical Process Equipment’s & System (CPES) & HiPurity business,” said Amit Anwani – Research Analyst, Prabhudas Lilladher.

“The stock is currently trading at PE of 31.6x/21.9x/20.9x FY23/24/25E. We have Buy rating on stock with TP of Rs520, valuing it at PE of 30x Sep24E.”

The government’s EBP programme has been extended to whole of India except Union Territories of Andaman Nicobar and Lakshadweep islands with effect from 1st April, 2019, to promote the use of alternative and environment friendly fuels. This intervention also seeks to reduce import dependence for energy requirements and give boost to agriculture sector.

The government had notified administered price of ethanol in 2014 and for first time during 2018, differential price of ethanol based on raw material utilised for ethanol production was announced by the government.