Sadbhav Engineering bags orders worth Rs. 869cr

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Sadbhav Engineering bags orders worth Rs.869cr

Sadbhav Engineering (SEL) has bagged two irrigation orders worth  `869cr from The
Executive Engineer, Narmada Development Division, Mandleshwar, Madhya Pradesh. The
projects are worth `349cr and `519cr and are in a JV with GKC Projects, with SEL’s share
at 60% and 40%, respectively. This is a positive development for the company and its order
backlog now stands at ~`8,150cr (4.6x FY2011E revenue).
At current levels, the stock is trading at valuations of 11.9x FY2012E earnings and 2.0x
FY2012E P/BV on a standalone basis, which we believe is attractive considering its huge
BOT portfolio, well-funded balance sheet and robust order backlog. Our target P/E
multiple for its construction business (expected to post earnings CAGR of 51.6% over
FY2010–12E) is 12x and we have valued its BOT arm on DCF basis. We maintain a Buy
rating on the stock with an SOTP-based target price of `173/share.