Nov 17, 2012 01:13 PM IST | Source:

Buy Tecpro Systems; target of Rs 198: KRChoksey

KRChoksey is bullish on Tecpro Systems and has recommended buy rating on the stock with a target of Rs 198 in its November 16, 2012 research report.

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KRChoksey is bullish on Tecpro Systems and has recommended buy rating on the stock with a target of Rs 198 in its November 16, 2012 research report.

“Tecpro systems registered strong net sales growth of 30.4% as net sales increased to Rs 591.1 cr. Operating margins improved by 198 bps to 15.1% on account of favorable sales mix. Consequently EBIDTA grew by 50.1% YoY to Rs 89.3 cr. Interest cost increased sharply by 54.8% to Rs 73.4 cr, which remains a concern. Other income increased to Rs 7.1 cr vs Rs 3.6 cr in Q2FY12. Other income is higher by Rs 3.44 cr due to change in accounting policy wrt exchange differences arising from foreign currency borrowing. Consequently adjusted PAT increased by 14% to Rs 9.8 cr. Order backlog stands at Rs. 4,430 cr. The company registered order inflows worth Rs 1,409 cr in H1FY13 vs Rs 837 cr in H1FY12.”

“Tecpro registered strong execution as sales increased by 30.4% YOY, in line with expectation. Material handling contributed 63% of the revenues followed by BOP constituting 29% and ash handling 8% of the total revenues. The company also registered healthy OPM%, above our expectation, on account of favorable sales mix. For full year management has guided a sales growth of 25% to 30% and maintained operating margins guidance at similar levels of FY12. Current debt stands at Rs 1800 cr (WC borrowing at Rs. 1,677 cr) vs Rs 1,021 cr in Q2FY12. Debtors outstanding are Rs 2,387 cr (above 300 days) of which retention money constitute Rs 815 cr. Debtors have stretched working capital and thereby increased short term borrowing in excess of 50% of annual sales. The company is focused on improving working capital management. It has Letter of credit for projects from clients like Lanco, Punj Lloyd, NTPC and on international projects. For current fiscal the company targets to maintain its debt at current levels of Rs 1,800 cr.”

“For H1FY13, Tecpro registered strong order inflows worth Rs 1,409 cr vs Rs 837 cr in H1FY12. Consequently order backlog increased to Rs 4,430 cr as of Q2FY13. Post H1 FY13, Tecpro registered order inflows worth Rs 210 cr taking total order inflow to Rs. 1,620 cr for the current fiscal. Power sector orders - AHP and CHP projects primarily contributed to growth in order inflows followed by international orders from Indonesia. The management has guided for order inflows in range of Rs 3,500 to Rs 4,000 cr for FY13 on back of bids made for BOP projects, CHP/AHP projects, NMDC steel plant MHE project and focus on international projects. A major BOP project is expected to be finalized by Dec 12. At CMP of Rs. 161 Tecpro is trading at a P/E of 6.7x FY13E earning and 5.7x FY14E. Considering attractive valuations, healthy order inflow in recent month we assign a P/E of 7x to its FY14E EPS of 28.3 and recommend a BUY on the stock with price target of Rs 198,” says KRChoksey research report.  

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