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The double Olympic medallist let slip an 11-3 advantage in the decider.
Sindhu will face second seed and world No. 7 Wang Zhi Yi of China in the summit clash.
Ashmita Chaliha lost to sixth-seeded Chinese Zhang Yi Ma in another quarterfinal.
Sindhu, seeded fifth, will next face top seed Han Yue in a revenge match.
Mixed doubles pair of B Sumeeth Reddy and N Sikki Reddy also advanced to the second round.
It was also the Keralite's first title after the triumph in the 2017 US Open.
Prannoy's opponent Christian Adinata of Indonesia conceded the semifinal match following a nasty knee injury.
The rally took place in the decider and lasted for almost four minutes.
Kidambi Srikanth went down to Indonesian qualifier Christian Adinata 21-16, 16-21, 11-21 in a men's singles quarterfinal clash.
World No. 22 Lakshya Sen went down fighting to Ng Ka Long Angus of Hong Kong 14-21, 19-21 in the pre-quarterfinals.
Results 1-10 of 16
