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Reasonably priced, subscribe for listing gains Power Mech Projects Ltd (PMPL) is a power infrastructure services company. PMPL is engaged in providing (i) comprehensive erection, testing and commissioning (ETC) of boilers, turbines and generators (BTG), balance of plant (BOP) works, (ii) civil works and (iii) operation & maintenance (O&M) services for thermal & hydro power plants in India and abroad. The topline has grown at a CAGR of 29.1% in FY11-15 to | 1366.2 crore in FY15. In FY15, PMPL realised ~67% revenue from the ETC segment (~| 910 crore), ~20% from the O&M segment (| 276 core) and 13% from the civil works segment (| 175 crore). On the bottomline front, the PAT has grown at a CAGR of 17.4% in FY11-15 to | 71.4 crore in FY15 with five year average EBITDA margins at 14%. PMPL has strong experience of executing ETC projects with power majors like Bhel, NTPC, Tata Power and Adani Power among others. The company is also one of the prominent players in the O&M segment for private power producers including Adani, Tata and Vedanta group among others. The company has priced its issue at a reasonable valuations of 13.2 x P/E on FY15 post issue diluted EPS of | 48.6. The debt gearing at PMPL is relatively lower with FY15 debt: equity at 0.7x and average cash flow from operations at ~ | 22.7 crore over FY12-15. Recommend SUBSCRIBE for listing gains. Investment Rationale Robust order book; strong clientele PMPL has an order backlog of | 3,406 crore (March 2015); with the ETC segment accounting for 67.6%, O&M segment 17.3% and civil works segment 15.1%. The average execution period of the order book for PMPL is ~25-32 months. Hence, on the given topline of | 1366 crore (FY15), the current order book provides strong revenue visibility for the next three years with book to bill ratio at 2.5x. PMPL also has a strong clientele including Bhel, NTPC in the public sector while Adani, L&T, GE Power, BGR, Thermax & Reliance Infra among others in the private sector. This provides credibility & revenue visibility for PMPL, going forward. Increasing focus on O&M segment to be margin accretive, going forward PMPL realises ~18-22% margin in the O&M segment, which constituted ~20% of its topline in FY15 vis-à-vis the ETC business wherein the margin ranges between 10% and 14%. Going forward, the management has strong focus on growing its O&M business, which should be margin accretive with current FY15 EBITDA margins at 12.2%. As of June 30, 2015, the company has been engaged in more than 400 O&M contracts & high margin 23 AMC services contracts for power plants across India. Concerns 1) Stretched working capital cycle (101 days in FY15; 67 days in FY14). 2) Risks inherent to power sector projects – time & cost overruns, which may impact execution and visibility