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Sadbhav Engineering, now an integrated road sector player with a portfolio of nine BOT road projects (2,403 lane km worth ` 80bln on gross cost) has consistently been ahead of its industry peers on addition of projects in times of low competitive intensity, capital management, completion of projects ahead of schedule & disciplined bidding thereby providing bandwidth in terms of capital & execution for any attractive opportunities that may come by. We believe the company offers a better risk-reward compared to its peers on aspects like project funding, order-book mix (internal/external), execution capability and working capital management. Its robust EPC potential from internal (road projects) and external (roads, mining & irrigation) orders strengthens our investment thesis. Sadbhav Engineering remains our top pick in the sector. We recommend buy with a price target of ` 186.
Focus on execution; to achieve COD well ahead
Sadbhav Engineering for the past year and a half has focussed on execution of its 4 BOT road projects won in FY10 & FY11. The management’s strategy of concentrating on construction has yielded results with Sadbhav expected to achieve COD 3-6 months ahead of schedule This not only makes Sadbhav eligible for bonus but also enables it to toll for higher duration to the extent of early completion
Ahead of curve in a dynamic & challenging environment
We like the management’s ability to see through the sector dynamics and being a step ahead of its peers in the industry. It is amply demonstrated by the milestones achieved. Better capital management, focus on execution & conservative bidding strategy in recent past has comfortably positioned the company with respect to funding & execution bandwidth.
Orderbook concerns weigh down on stock; confident of its 3rd party EPC capabilities
As on Dec’11, the order book stands at ` 59.4bln.Captive road BOT’s order contribute 28%. With execution of captive orders expected to be completed in FY13 & a dismal order inflow in 9M1F12, the EPC growth concerns has weighed down on the stock. We are confident of Sadbhav’s 3rd party EPC capabilities since the company has EPC capabilites across three segments of Road, Irrigation & Mining.
Valuation; Top pick in the sector
With strong EPC capability across multiple sectors & scale, higher capital efficiency and timely completion of its BOT assets Sadbhav Engineering remains our top pick. We maintain Buy with a PT of ` 186. We have valued the EPC entity at ` 86.1/share on the basis of 9x FY13P earnings whilst the BOT projects contribute ` 96.2/share (52%) based on a FCFE approach and one time early completion bonus of ` 3.6/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sadbhav Engineering, now an integrated road sector player with a portfolio of nine BOT road projects (2,403 lane km worth ` 80bln on gross cost) has consistently been ahead of its industry peers on addition of projects in times of low competitive intensity, capital management, completion of projects ahead of schedule & disciplined bidding thereby providing bandwidth in terms of capital & execution for any attractive opportunities that may come by. We believe the company offers a better risk-reward compared to its peers on aspects like project funding, order-book mix (internal/external), execution capability and working capital management. Its robust EPC potential from internal (road projects) and external (roads, mining & irrigation) orders strengthens our investment thesis. Sadbhav Engineering remains our top pick in the sector. We recommend buy with a price target of ` 186.
Focus on execution; to achieve COD well ahead
Sadbhav Engineering for the past year and a half has focussed on execution of its 4 BOT road projects won in FY10 & FY11. The management’s strategy of concentrating on construction has yielded results with Sadbhav expected to achieve COD 3-6 months ahead of schedule This not only makes Sadbhav eligible for bonus but also enables it to toll for higher duration to the extent of early completion
Ahead of curve in a dynamic & challenging environment
We like the management’s ability to see through the sector dynamics and being a step ahead of its peers in the industry. It is amply demonstrated by the milestones achieved. Better capital management, focus on execution & conservative bidding strategy in recent past has comfortably positioned the company with respect to funding & execution bandwidth.
Orderbook concerns weigh down on stock; confident of its 3rd party EPC capabilities
As on Dec’11, the order book stands at ` 59.4bln.Captive road BOT’s order contribute 28%. With execution of captive orders expected to be completed in FY13 & a dismal order inflow in 9M1F12, the EPC growth concerns has weighed down on the stock. We are confident of Sadbhav’s 3rd party EPC capabilities since the company has EPC capabilites across three segments of Road, Irrigation & Mining.
Valuation; Top pick in the sector
With strong EPC capability across multiple sectors & scale, higher capital efficiency and timely completion of its BOT assets Sadbhav Engineering remains our top pick. We maintain Buy with a PT of ` 186. We have valued the EPC entity at ` 86.1/share on the basis of 9x FY13P earnings whilst the BOT projects contribute ` 96.2/share (52%) based on a FCFE approach and one time early completion bonus of ` 3.6/share.
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