Accumulate Madhucon Projects; tgt of Rs 117: Angel Broking

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Accumulate Madhucon Projects; tgt of Rs 117: Angel Broking

Angel Broking is bullish on Madhucon Projects (MPL) and has recommended accumulate rating on the stock with a target of Rs 117 in its May 2, 2011 research report.

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Angel Broking is bullish on Madhucon Projects (MPL) and has recommended accumulate rating on the stock with a target of Rs 117 in its May 2, 2011 research report.

"Madhucon Projects (MPL) reported broadly in-line numbers for 4QFY2011, though the company surprised on the margin front. MPL's order book at 3.7x FY2011 revenue provides good revenue visibility. However, we are revising our numbers for FY2012 and FY2013 to factor in the lower top-line growth, lower operating margin and higher interest outgo. MPL reported decent top-line growth of 22.0% yoy to Rs 593.4 crore, marginally above our expectations of Rs 578.8 crore. OPM stood at 10.6% (6.4%), posting a whopping jump of 420bp yoy against our expectations of a 265bp jump. On the earnings front, the company posted robust growth of 180.0% yoy to Rs 19.3 crore against our expectations of a 121.7% jump. Earnings were above our estimates on account of higher margin recovery than anticipated."

"We believe the key triggers to watch out for MPL should be the pick-up in execution in the development business and building of an attractive asset portfolio to raise money. However, these plans would fructify somewhere in 2HFY2012 only and will be based on the market conditions prevailing then. Hence, we believe till then the stock would be a sector performer and real value would be created only on unlocking at the subsidiary level. Further, increasing debt levels are worrisome signs (FY2011 net D/E - 1.3); hence, value unlocking becomes more pertinent. We are downgrading the stock to Accumulate from Buy due to 1) stretch in working capital; 2) increase in debt levels, which is expected to continue; 3) ~40% of the overall order book that is slow-moving; and 4) consistent delays in commissioning of projects (read Road BOT and Coal). Our revised target price stands at Rs 117/share (Rs 138/share)," says Angel Broking research report.

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To read the full report click on the attachment