17 hours ago
Multibagger ethanol stock faces worst year since 2008, down over 50% in 2025. Time to exit?
Praj Industries, one of the leading global biotechnology and engineering companies, has seen its shares tumble sharply in recent sessions, hitting levels not seen in the recent past. This comes after analysts cut their target prices following the company's June-quarter results, which marked its weakest performance in recent years.
The stock has taken a severe beating following the figures as investors rushed to exit, erasing nearly 14% of its value so far this month, the second consecutive monthly drop after a 9% decline in July.
This sharp fall has also dragged the stock down 51% in 2025 so far, its worst yearly performance since 2008. If the stock fails to recover in the remaining months, it will also mark its first annual decline since 2019.
The company on Monday (August 11) reported a 94% decline in consolidated net profit to ₹ 5.34 crore, compared to ₹ 84.18 crore in the same period last year. The fall was attributed to rising costs and a drop in volumes in the domestic ethanol business, driven by delayed execution cycles and liquidity constraints at customers' end.
Domestic demand remained sluggish due to policy uncertainty beyond the current 20% ethanol blending target, coupled with uncertainty over the timeline for the new EBP mandate, which analysts expect could limit near-term greenfield opportunities for the company.
Margin pressures on ethanol producers, particularly sugar mills, persisted due to the absence of a price revision despite rising production costs, a factor which, according to Centrum Broking, has dampened investment appetite among core customers.
While the total addressable market (TAM) for bioenergy remains structurally large, monetization has been slower than expected.
Meanwhile, the company's Mangalore facility continues to be a significant cost overhang due to execution delays. Centrum Broking noted that these delays are partly linked to prevailing US tariffs on Indian exports, creating uncertainty over project commencements.
Despite a healthy pipeline of inquiries for 1G ethanol from the Americas region, order bookings remained low due to delayed decision-making.
Its revenue dropped by 8.4% to ₹ 640 even as order backlog remained strong. The order intake during the quarter came in lower at ₹ 795 crore, and the consolidated order backlog stood at ₹ 4,448 crore. Therefore, revenue recognition lagged, putting pressure on FY26 growth.
Centrum Broking remains constructive on Praj Industries' long-term prospects, citing its market leadership in domestic ethanol plant equipment, strong R&D capabilities, and unique pure-play exposure to the bioenergy value chain. The brokerage expects the company to benefit from rising ethanol adoption, including emerging diesel-blending and industrial applications.
While near-term earnings pressures persist, it believes Praj's structural positioning remains intact in a policy-supported sector. Centrum retained its ADD rating but cut the target price to ₹ 460 from ₹ 590 earlier.
Prabhudas Lilladher noted that Praj Industries is exploring alternative uses and geographies for its GenX facility amid uncertainty over tariff implications.
While near-term challenges persist, the brokerage said the company's diversification into CBG, bio-bitumen, biopolymers, and SAF is gaining traction, opening up new growth avenues. It downgraded the stock to Hold from Buy and reduced the target price to ₹ 393 from ₹ 545 earlier.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
