Multibagger stock: Over 50% upside potential! Axis Securities bets on this smallcap stock

Shares of Praj Industries have delivered 280 per cent in the last five years and over 870 per cent in the last ten years. The multibagger stock is currently down over 23 per cent from its 52-week high of Rs 461.5. However, it has recovered over 62 per cent from its 52-week low of Rs 219.35.

The smallcap stock hit a 52-week high of Rs 461.50 on October 11, 2022, and a 52-week low of Rs 289.05 on May 26, 2022.

Praj Industries is engaged in the field of bio-based technologies and engineering. It is a supplier of ethanol plants and offers sustainable solutions for bioenergy, high-purity water, critical process equipment, breweries and industrial wastewater treatment.

The company posted a 68 per cent jump in consolidated net profit at Rs 62.31 crore for the quarter ended December 2022 compared to Rs 37.05 crore in December 2021 quarter. Consolidated revenue climbed 55 per cent to Rs 909.97 crore in Q3FY23 versus Rs 585.64 crore in Q3FY22.

Axis Securities believes that the current setup is a ‘Buy on Dips’ market. The brokerage firm has maintained its bullish stance on Praj as the company is well-placed to grow and will have less impact of global geo-political volatility on business. It has a 'Buy' rating on the stock with a target price of Rs 550, implying an upside potential of over 54 per cent from Friday's closing price of Rs 356.45.

The brokerage firm noted that Praj is witnessing strong growth in its key segment. Bioenergy in Domestic business, the overall demand-supply gap of Ethanol, increased interest in grain-based distilleries and decarbonization impetus is auguring well for Praj along with development in other key verticals such as CPS, ZLD & High Purity gaining traction.

"Praj is a key beneficiary of multiple tailwinds provided by the bio-economic revolution, giving strong growth &revenue visibility for the next 3-5 years. The company's key growth levers remain strong," it added.

Axis Securities also believes that the company is witnessing more growth in grain-based distilleries which has reduced the seasonality of the business which was predominantly based on the sugar cycle. This has led to year-round utilisation of assets resulting in an improved asset turnover ratio from 0.98 to 1.23 in FY22. This has also led to less strain on the supply chain and improved order execution rate.

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