Accumulate BGR Energy; target of Rs 520: Angel Broking

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Accumulate BGR Energy; target of Rs 520: Angel Broking

Angel Broking is bullish on BGR Energy and has recommended accumulate rating on the stock with a target of Rs 520 in its May 30, 2011 research report.

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Angel Broking is bullish on BGR Energy and has recommended accumulate rating on the stock with a target of Rs 520 in its May 30, 2011 research report.

"After solid performance in the past few quarters, BGR Energy systems (BGR) retreated on its performance in 4QFY2011. The company's revenue and PAT declined by 11.9% (est. 9.9%) and 9.2% (est. 28.8%) yoy to Rs1,462cr and Rs98cr, respectively. The stock has substantially de-rated due to poor order inflows."

"For 4QFY2011, revenue and PAT fell by 11.9% and 9.2%, respectively, due to high base effect. Despite higher raw-material costs, EBITDA margin improved by 90bp yoy to 11.5% due to lower employee cost and other expenses. For FY2011, revenue grew by 54.9% to Rs4,761cr (Rs3,074cr), led by solid execution of EPC projects. Profitability remained intact with 11.6% EBITDA margin and 61.3% growth in PAT to Rs324cr (Rs201cr)."

"Order backlog (Rs8,000cr - 1.5x FY2012E revenue - at the end of the quarter) provides reasonable revenue visibility for FY2012. With management's guidance of 15% of top-line growth, the existing order book is expected to deplete by 70%. Absence of high-value order inflows in the current fiscal will diminish the company's future growth trajectory. Historically, the stock has traded at 4-28x, with an average multiple of 12.5x."

"The stock has commanded premium valuations in the past on the back superior results in the previous quarters and strong growth prospects. However, the stock has been substantially de-rated amid poor order inflows and the consequent sustainability of future growth. Key triggers to the stock would be order wins from Rajasthan SEB and the NTPC bulk tender. We assign a multiple of 10.8x FY2013 EPS to arrive at a target price of Rs520. We recommend Accumulate on the stock," says Angel Broking research report.

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To read the full report click on the attachment