Nov 17, 2012 01:14 PM IST | Source:

Buy Technofab Engg; target of Rs 182: Ventura

Ventura is bullish on Technofab Engg and has recommended buy rating on the stock with a target of Rs 182 in its November 16, 2012 research report.

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Ventura is bullish on Technofab Engg and has recommended buy rating on the stock with a target of Rs 182 in its November 16, 2012 research report.

“TEL recorded 17.2% YoY in Q2FY13 to Rs 109.9 crore as against Rs 93.8 crore in Q2FY12 led by timely execution of on-going projects. Power and Water segment continues to be the higher contributory to the top-line with 39% and 34% respectively, followed by Oil & Gas (16%), Industrials (10%) and Electricals (1%) segments. EBITDA of the company was lower by 3.8% YoY to Rs 12.8 crore in Q2FY13 from Rs 13.3 crore in Q2FY12 on account of ~78% YoY increase in input costs. Finance costs were higher during the quarter at Rs 1.6 crore (+13.8% YoY). Consequently, PAT was at Rs 7.2 crore in Q2FY13 as against Rs 7.6 crore (-5.0% YoY) owing to the decline in other income (Rs 0.07 crore v/s Rs 0.2 crore; -74.5% YoY) and rise in finance costs (+13.8% YoY).”

“EBITDA margins for the quarter contracted by 260 bps YoY to 11.6% from 14.2% in Q2FY12. It also contracted on sequential basis by 190 bps. PAT margin contracted by 150 bps YoY to 6.6% in Q2FY13 as against 8.1% in Q2FY12. The management attributed intense competition coupled with continued slowdown in domestic industry for the margin pressure. However, it is confident of improving the margins going ahead. The company has received order inflow of ~Rs 350 crore during H1FY13 which takes its order back log to Rs 1,100 crore (2.9x FY12 revenues). Moreover, the company has guided to achieve order book of ~Rs 950-1,000 crore in FY13. As of H1FY13, its mainstream order book comprises of Power (Thermal – 28%, Nuclear - 2%) and Water (29%) followed by Oil & Gas (9%), Industrials (13%) and Electrical distribution & rural electrification (13%).”

“While the infrastructure sector is reeling under the pressure of high debt burden and a slowing economy, Technofab Engineering Ltd (TEL) with its large order book of over Rs 1,100 crore and low debt equity of ~0.3x is expected to outperform the industry. Owing to revenue visibility (2.7x FY12 revenues), we expect the revenues to grow at a CAGR of 22.5% to Rs 566.3 crore over the forecast period of FY13-14. At a CMP of Rs 123, TEL is trading at 3.5x and 2.7x its estimated earnings for FY13 and FY14 and we reiterate a BUY with the price target of Rs 182 (target 4.0x FY14 EPS) representing a potential upside of 48%,” says Ventura research report.    

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