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http://content.icicidirect.com/mailimages/ICICIdirect_SadbhavEngineering_InitiatingCoverage.pdf
A c c e l e r a t i n g o n f a s t l a n e …
Sadbhav Engineering (SEL) is an infrastructure developer and EPC player
with a reputation of timely completion of projects. SEL holds varying
stakes in nine BOT projects aggregating | 7859 core (equity requirement -
| 1011 crore through its subsidiary (SIPL) for which funding (both equity
and debt) has largely been tied up. Once operational, we anticipate SEL’s
consolidated toll revenues will grow exponentially to | 1.7 crore/day
supporting SEL’s consolidated cash profit growing 2.3x to | 345 crore
during FY11-14E. Additionally, post emerging L-1 bidder for | 1280 crore
project from NHAI, we anticipate SEL’s order book will increase to | 6466
crore, 2.6x order book to bill ratio (on a TTM basis) lessening concerns
over revenue visibility.
SIPL’s toll revenue to grow exponentially
SIPL (SEL’s stake-77.8% stake) has a BOT project portfolio of nine
projects aggregating | 7859 core (equity & sub debt commitment - | 1011
crore). These projects have financially been closed and there has been
equity & sub debt infusion of | 658 crore till Q3FY12 (largely deployed
through PE deal worth | 400 crore). Once operational, we anticipate
SIPL’s toll revenues to grow exponentially by 6.4x at | 555 crore or | 1.7
crore/day during FY11-14E. Consequently, we anticipate SEL’s
consolidated cash profit to grow 2.0x at | 344.9 crore during FY11-14E.
Construction business - Execution on track
With a domain expertise of 22 years, SEL has a reputation of completing
projects on time along with quality of work. As on Q3FY12, SEL has an
order book of | 5940 crore, 2.1x order book to bill ratio (on TTM basis).
However, with the recent L-1 bid of | 1280 crore from NHAI in BOT
segment, we anticipate SEL will close the order book at | 6466 crore, 2.6x
order book to bill ratio (on a TTM basis). Going ahead, while we see huge
opportunities in roads & mining, we have built in conservative order
inflow at a CAGR of 7.7% in FY11-14E. Consequently, we anticipate SEL’s
construction revenues will grow at a CAGR of 13.2% during FY11-14E.
Valuations
At the CMP, the stock is trading at 18.4x FY13E EPS and 1.8x FY13E P/BV
multiples. Given the reputation of timely completion of projects and with
funding for its BOT project portfolio largely tied up, we like SEL. However,
given the sharp run up in last one year, we see limited upside at the
current levels. Hence, we are initiating coverage on the stock with a Hold
recommendation and advise clients any dip on the stock should be used
as opportunity to accumulate the position in the stock. We value SEL at
|166 /share (BOT - |84.8/share & construction at | 80.7/share)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_SadbhavEngineering_InitiatingCoverage.pdf
A c c e l e r a t i n g o n f a s t l a n e …
Sadbhav Engineering (SEL) is an infrastructure developer and EPC player
with a reputation of timely completion of projects. SEL holds varying
stakes in nine BOT projects aggregating | 7859 core (equity requirement -
| 1011 crore through its subsidiary (SIPL) for which funding (both equity
and debt) has largely been tied up. Once operational, we anticipate SEL’s
consolidated toll revenues will grow exponentially to | 1.7 crore/day
supporting SEL’s consolidated cash profit growing 2.3x to | 345 crore
during FY11-14E. Additionally, post emerging L-1 bidder for | 1280 crore
project from NHAI, we anticipate SEL’s order book will increase to | 6466
crore, 2.6x order book to bill ratio (on a TTM basis) lessening concerns
over revenue visibility.
SIPL’s toll revenue to grow exponentially
SIPL (SEL’s stake-77.8% stake) has a BOT project portfolio of nine
projects aggregating | 7859 core (equity & sub debt commitment - | 1011
crore). These projects have financially been closed and there has been
equity & sub debt infusion of | 658 crore till Q3FY12 (largely deployed
through PE deal worth | 400 crore). Once operational, we anticipate
SIPL’s toll revenues to grow exponentially by 6.4x at | 555 crore or | 1.7
crore/day during FY11-14E. Consequently, we anticipate SEL’s
consolidated cash profit to grow 2.0x at | 344.9 crore during FY11-14E.
Construction business - Execution on track
With a domain expertise of 22 years, SEL has a reputation of completing
projects on time along with quality of work. As on Q3FY12, SEL has an
order book of | 5940 crore, 2.1x order book to bill ratio (on TTM basis).
However, with the recent L-1 bid of | 1280 crore from NHAI in BOT
segment, we anticipate SEL will close the order book at | 6466 crore, 2.6x
order book to bill ratio (on a TTM basis). Going ahead, while we see huge
opportunities in roads & mining, we have built in conservative order
inflow at a CAGR of 7.7% in FY11-14E. Consequently, we anticipate SEL’s
construction revenues will grow at a CAGR of 13.2% during FY11-14E.
Valuations
At the CMP, the stock is trading at 18.4x FY13E EPS and 1.8x FY13E P/BV
multiples. Given the reputation of timely completion of projects and with
funding for its BOT project portfolio largely tied up, we like SEL. However,
given the sharp run up in last one year, we see limited upside at the
current levels. Hence, we are initiating coverage on the stock with a Hold
recommendation and advise clients any dip on the stock should be used
as opportunity to accumulate the position in the stock. We value SEL at
|166 /share (BOT - |84.8/share & construction at | 80.7/share)
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