May 16, 2011, 11.41 AM | Source: Moneycontrol.com
Networth Stock Broking is bullish on GEI Industrial Systems and has recommended buy rating on the stock with a target of Rs 292 in its May 13, 2011 research report.
Manav Chopra (more)
, Networth Stock Broking | Capital Expertise: Equity - Technical
“GEI Industrial Systems, Q4FY11 results were slightly below our expectations due to increase in raw material prices denting the operating performance of the Company. However, in terms of order book growth and revenue increase the Company performed in line with our expectations. GEI currently has an order backlog of Rs. 350 crs. The current order book comprises of orders from Power (75%) sector and Oil and Gas (25%) segment. The management indicates the proportion of power to increase further to ~80:20 by FY12E. Net sales increased by 30% YoY and 17% QoQ to Rs. 113 crs during Q4FY11 due to substantial increase in order book.”
“GEI’s operating performance dampened due to increase in raw material expenses (~25% both QoQ and YoY) with EBITDA margins shrinking to ~14% (20% in Q3FY11). This resulted in a sequential dip in EBITDA by over 20% to Rs. 15.5 crs. However, on a YoY basis the EBITDA increased by over 42%. The management believes that the raw material prices will continue to affect the earnings sensitivity as they are unable to pass the increase to their clients. However, they are positive that the recent increase in prices will steam out and the raw material prices will come back to normal levels. GEI’s PAT increased by ~39% YoY to Rs. 5.8 crs translating to a PAT margin of 6%.”
“GEI reported impressive results for FY11, in line with our expectations. The Company’s net revenues increased by over 44% to Rs. 362.83 due to increase in order book. We witnessed great acceptance of Air Cooled Steamed Condenser technology translating into healthy order book status of Rs. 350 crs. EBITDA improved to Rs. 66.2 crs (83% YoY increase) translating into operating margins of over 18% (14% in FY10). The Company hired expert consultants to guide them in cost control and inventory management which resulted in a dramatic increase in margins. Also the Company moved from Oil and Gas and started focusing on high margin Power business through Air Cooled Steam Condensers which aided the margin improvement.”
“Due to promising order visibility, on-track expansion, growing demand for air cooled condensers and boost from GEI power, we upgrade our FY12E revenue estimate to Rs. 563 crs and projet Rs. 725 crs revenue during FY13E. We expect the EPS to therefore expand to Rs. 29 and Rs. 35 (diluted) for FY12E and FY13E respectively. At last closing price of Rs. 195, GEI is trading at a PE of over 7x FY12E EPS. We maintain our BUY rating on the stock with price target to Rs 292 per share with an upside of 54% (10x FY12E EPS),” says Networth Stock Broking research report.
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