Praj Industries GenX data-centre orders and record backlog support margin recovery

Investment View and Q1 FY27 Performance

Prabhudas Lilladher upgraded Praj Industries to Buy from Accumulate in its August 15, 2026 Q1 FY27 result update, following the stock-price correction and the beginning of GenX orders. The broker described the quarter as mixed, with revenue ahead of estimates but profitability affected by lower volumes and an unfavourable mix.

Adjusted PAT was supported by other income of Rs111 million and lower interest cost. Reported profitability also included an Rs89 million insurance claim related to a fire incident.

Record Order Book and Order Intake

Order intake was approximately Rs10,000 million, up about 26% year-on-year, lifting the order book to a record Rs45,900 million. This represents 1.4 times trailing-twelve-month revenue and improves revenue visibility.

The order book had a 63% domestic and 37% export mix. Prabhudas Lilladher expects the growing international and newer-technology mix to improve revenue visibility and potentially support margin recovery.

Execution Environment and Growth Outlook

Domestic greenfield 1G ethanol execution remains constrained by paused capacity additions, customer funding issues and a supply-demand imbalance. These factors have lengthened project cycles, delayed the conversion of backlog into revenue and affected collections. Raw-material volatility, supply-chain disruptions and geopolitical uncertainty have also weighed on execution and order conversion.

Domestic brownfield opportunities in distillers, DCO, other co-product and efficiency solutions have better traction, while greenfield ENA demand remains healthy. Management remains positive on international ethanol opportunities across Brazil, the US, Indonesia, Vietnam, Costa Rica, Bolivia and other Latin American markets. However, longer engineering and execution timelines could delay revenue recognition.

Management expects a better mix of international orders, lifecycle services and newer biofuels, including CBG and Bio-IBA, to support margins. Services are expanding through physical and digital plant-performance solutions, performance enhancers and biogenic carbon dioxide capture, with trials underway in Latin America. GenX and research and development investment remain near-term drags.

CBG and Biofuels Opportunities

The GOBARdhan scheme of more than Rs230 billion through FY36, which targets a tenfold increase in CBG production, could support a larger CBG opportunity. Praj has end-to-end capabilities in digestion, biogas cleaning, compression, delivery and lifecycle services. Management nevertheless acknowledged high competition and currently weak industry margins.

GenX, SAF, Bio-IBA and Hi-Purity Developments

GenX secured a global supply agreement worth at least US$50 million, or approximately Rs5,000 million, over 2.5 years for hyperscale data-centre server-hall infrastructure and cooling systems. Deliveries are expected between Q2 FY27 and Q4 FY27, and management targets GenX EBITDA breakeven by the end of FY27.

Praj received a detailed engineering order for an ethanol-to-SAF plant from an international customer and India's first commercial-scale Bio-IBA demonstrator order, targeted for completion by December 2026. A potential 2% Bio-IBA diesel blending mandate could create more than Rs30,000 million of project opportunity, although the timing of the mandate remains uncertain.

Hi-Purity won its first combined ultra-pure water and zero-liquid-discharge order from an Indian semiconductor company. The project provides a reference opportunity for the Batteries, Semiconductors and Solar ecosystem.

Estimates, Valuation and Key Risks

Prabhudas Lilladher raised its FY27E and FY28E sales estimates by 1.7% and 3.4% to Rs35,771 million and Rs42,262 million, respectively. FY27E EBITDA was reduced by 5.1% to Rs2,987 million and FY27E EPS by 2.9% to Rs10.2. FY28E EBITDA and EPS remained broadly unchanged at Rs4,163 million and Rs15.0.

The target price is Rs390, based on 26 times March 2028E earnings. The valuation multiple is unchanged, compared with the previous target price of Rs389.

Key concerns identified by PL include weak near-term execution, domestic liquidity constraints and limited visibility on greenfield 1G ethanol. Potential long-term growth drivers include stronger GenX orders, prospective ethanol and diesel blending mandates, CBG, SAF and Bio-IBA.