In this article, we will have a look at “One low volatile bioenergy stock to buy in 2023.” Before analysing the stock, let us have a quick overview of bioenergy and wastewater treatment industry. The emerging waste-to-energy technologies appear to have potential to impact bioenergy market by improving demand and making bioenergy more efficient. Such innovative technologies tend to focus on converting several types of waste into energy. As a result, this helps in addressing waste management challenges and renewable energy generation.
New technologies including anaerobic digestion, gasification, and pyrolysis are in the process of development and they are being optimized to enhance energy conversion efficiency, increase process reliability, and manage the emissions. Examples of waste-to-energy technologies consist of anaerobic digestion, incineration, plasma gasification, waste-to-liquid (WTL) technologies, solid recovered fuel (SRF) production. Experts believe that global bioenergy market size has been pegged at ~$344.90 billion in 2019 and this market should be able to compound at 8.0% between 2020-2027 period to touch $642.71 billion by 2027. Growth in bioenergy market should be stemmed from increased focus on renewables and other non-fossil fuel-based energy sources including solid biomass, biogas, and others.
Apart from bioenergy market, wastewater treatment industry has a strong and favourable outlook. As per experts, India Water and Wastewater Treatment Technologies market size should be able to compound at ~10.78% from $0.92 billion in 2023 to $1.54 billion by 2028. Indian water and wastewater treatment (WWT) technology market has been segmented in terms of equipment type and end-user industry. Global experts believe that, by 2030, India’s water demand should surpass supply by two times. This exhibits that India continues to face scarcity of water. Such sort of water shortage for industrial and residential use might increase the need for such water treatment systems over long run.
Major end-user industries which continue to use anaerobic biological treatment in India consist of municipal wastewater treatment, F&B manufacturing, chemical effluent, and agricultural waste. Growing awareness continues to drive demand for anaerobic biological treatment equipment in the country. Talking about recent developments in the industry, in late 2022, Wabag Limited signed agreement with Asian Development Bank (ADB) to raise funds of INR200 crores (~USD 24.6 million) with the help of unlisted NCDs carrying 5 years and 3 months tenors. ADB plans to subscribe to it over 12 months for water treatment business.
With this in mind, we will now study a low volatile bioenergy and wastewater treatment stock to buy in 2023.
Praj Industries Ltd
The company has been categorised as India’s most successful company in field of bio-based technologies and engineering having presence throughout the world. It has global presence with bouquet of sustainable solutions for bioenergy, critical process equipment, breweries and industrial wastewater treatment.
In 1Q24, Praj Industries saw income from operations of INR7,367.227 million in comparison to INR7,319.714 million in 1Q23. PAT of the company came in at INR586.726 million. The company began FY24 on a positive note because of its healthy order book and improvement in profitability. Given positive business environment, higher share of international orders and strong delivery capabilities the company should be able to embark its growth journey.
Praj and IndianOil signed term sheet for joint venture formation to focus on advancing plans to strengthen biofuels production capacities in the country. Range of biofuels are covered under this initiative such as SAF, Ethanol, CBG, Biodiesel, etc.
In FY23, this low volatile bioenergy and wastewater treatment stocksaw healthy and consistent performance through leveraging its technology edge and strong delivery capabilities. Energy transition and climate action (ETCA) agenda resulted in opening new opportunities for the company’s engineering businesses. Enhancement of mobility solutions beyond surface mobility including SAF continue to expand horizons of opportunity for the company’s business.
In FY23, its revenues on consolidated basis came in at INR35,280.37 million, with its PAT coming at INR2,398.18 million.
The company expects that industry and transportation sector should focus on minimizing carbon emissions and harness greener energy sources to achieve net zero obligations. It has a 2-pronged strategy in Bioeconomy. Firstly, Bio-MobilityTM platform of technologies for sustainable decarbonization and, secondly, Bio-PrismTM portfolio of technologies for carbon recycling. With the help of such solutions, the company continues to make significant contributions for sustainable climate actions. Indian economy, because of its domestic consumption story, should show resilience while there are concerns about global recession.
Overall, the company is optimistic about continued development of potential throughout its bioenergy and engineering businesses. Even though there are global economic challenges, the company anticipates favourable business environment as a result of stabilized commodity prices and ever-increasing awareness to decarbonize global economy. The company believes that demand for low carbon ethanol in the USA opened significant opportunities regarding modernization of old ethanol plants.
Successful demonstration of India’s first commercial flight supported by blend of indigenous sustainable aviation fuel should be able to accelerate development of SAF opportunity. As India becomes signatory to CORSIA, compulsory blending of SAF from 2027 as per the agreement should help in creating significant opportunities. Indian government aims to come up with mandates on SAF over the course of time. If the company targets to blend 1% SAF blending in Jet fuel, India should need ~14 crore litres of SAF/annum.
This low volatile bioenergy and wastewater treatment stock had orders worth INR3,380 crore as on December 31, 2022 throughout its 3 business segments. This assures medium-term visibility for the revenues. During the first 9 months of fiscal 2023, the company saw improvement in new order inflow for ethanol business because of favourable policies being announced by Indian government. Rising demand and supportive government policies should help the bioenergy segment of the company. Order inflow should gradually improve which should further help its revenues.
This low volatile bioenergy and wastewater treatment stock has the beta value of 0.57, indicating a very low volatility. The company has diversified geographical presence and exports contributed 15-20% to the revenue in the previous 5 fiscals through December 2022. Its financial risk profile is healthy supported by healthy cash accrual and negligible debt.
Read Also:
3 Comments