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Saturday, June 28, 2008

Praj Industries - Best Indian Stock Pick

Biofuel technology and equipment provider Praj Industries is always loved by Stock market investors. Pune based alternative fuel major attracted legendary investors like Vinod Khosla and Rakesh Jhunjhunwala. Praj Industries is in good position to capitalise on the world search for alternative energy sources due to high crude oil prices. Praj Industries developed ground breaking Lignocellulosic technology to produce ethanol from non-crop products like Sugarcane.

Significant News:

1. Praj Industries started the commercialisation of Lignocellulosic technology process- Biomass magazine (July, 2008). Praj started commercialisation process 1 year earlier than analysts' expectations.
2. Praj recently got Rs 1.2 billion order for bio-ethanol equipment from UK-based Vivergo. Company set up manufacturing unit at Kandla SEZ to meet global demand.
3. Praj Industries won the Star SME award at Business Standard annual awards function.
4. Biofuel equipment agreement with Maple Energy for its South American plant.

Praj Industries Stock analysis:

CMP: 165
P/E: 19.6
1 Year high-low: 273-100.

Image source: Business Week.

Praj Industries target price: It is better for short term investors to stay from this scrip. Long term investors can accumulate more on further fall without hesitation.

1 year target: 220-230 (EPS will be around 10 and P/E will improve to 22). This is a conservative estimate due to current bear market conditions.
Ideal investment duration: 3-4 years.

Interesting statistic: Praj Industries gave more than 2500% returns in the last 5 years.
 
 

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Why Praj Industries is a good long term stock?

1. Praj has 10 years experiences in Biofuels and has 9% market share in global Biofuel market. It is an undisputed leader in India.
2. Lignocellulosic technology developed by Praj will provide huge commercial opportunities.
3. Government policy of ethanol blending with petrol is another opportunity.
4. It is a zero debt company which is good in high interest rate times.
5. It is in alternative energy business which has good prospects in these high crude oil price times.
6. It is providing advance technology to firms like Tata Chemicals and Praj has more than Rs 900 crore order book from 35 countries.
7. Most of the mutual funds increased their holdings in Praj Industries in May.
8. Its global acquisitions will add revenues to the balance sheet in the next 1-2 years.
9. Analysts are expecting 25% growth in sales and 30% growth in profits. Praj may beat their expectations due to Lignocellulosic technology.
10. Sugar companies will make huge investments in Biofuel space- huge demand for Praj technology and solutions.

Negative triggers for Praj Industries:

1. Change in policies of Governments towards Biofuels due to food shortage.
2. Government interference in sugarcane prices is another concern.

Advice for technical investors: Praj Industries is currently trading just above its strong support levels. Fall to below 158 levels is a concern. This information is only for the sake of short term investors.
 

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Verdict: If you believe in the alternate energy theory, you should buy Praj Industries. It has strong management, giant investors' support, vast experience, ability to grab upcoming opportunities; ability to develop new technologies coupled with strong growth visibility made Praj Industries a strong buy for long term investors with 24-30 months horizon. Tata Sons bought 7% stake in Praj Industries and Praj is working closely with Tata Chemicals in the Biofuel space.
 
Source: stockmarketguide .in

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