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Angel neutral on Gammon India
Angel Broking has recommended a neutral rating on Gammon India (GI). The research firm has assigned P/E multiple of 6x FY2010E EPS of Rs 13.6 to GI's Construction business
Angel Broking has recommended a neutral rating on Gammon India in its December 19, 2008 research report. "We have assigned P/E multiple of 6x FY2010E EPS of Rs 13.6 to GI's Construction business. We have valued GI's stake in GIPL and investments in Sadbhav Engineering on holding company discount basis contributing Rs 39.9 and Re1, respectively. We have not assigned any value to the Italian companies due to lack of clarity on the Revenue front and concerns about GI's ability to turn them around. However, we have factored in Interest costs arising from the acquisitions."
"We have arrived at a Fair Value of Rs 123 for GI, translating into an upside of 70%. However, we are cautious about the Profitability of the Italian companies, as the firms posted a loss of Euro101mn at PBT level in CY2007. Though management expects the companies to turn-around in the near future, we would 'wait and watch' especially considering that the companies would be competing with majors like BHEL, L&T, etc. Therefore, we Initiate Coverage on the stock with a Neutral recommendation," says Angel Broking's research report.
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