Buy ICSA India; target of Rs 150: ICICIdirect.com

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Buy ICSA India; target of Rs 150: ICICIdirect.com

ICICIdirect.com is bullish on ICSA India and has recommended buy rating on the stock with a target of Rs 150, in its August 13, 2010 research report.

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ICICIdirect.com is bullish on ICSA India and has recommended buy rating on the stock with a target of Rs 150, in its August 13, 2010 research report.

"On the basis of the current order book position and nature of orders, we have scaled down our revenue expectation and earnings estimate steeply. The ESS business is expected to clock in orders related to SCADA in Q3FY11 to the tune of Rs 500-600 crore with a likely execution period of 18 months. These will be one-time orders followed by maintenance work, which will be of a small size. Thus, even if these orders come in, it will aid the revenues only in FY12. Post that, the company will again derive business only for its metering and automation business. The smart metering facility with monthly capacity of 1,50,000 meters is now operating at 1,00,000 to 1,20,000 meters per month."

"The company expects it to reach 100% utilisation by the end of FY11 contributing revenues to the tune of Rs 90-120 crore annually. Thus, on a long-term basis, the company's growth driver will be IPS only. We expect the revenues to grow at 10% and 15% in FY11 and FY12, respectively. Also, the SCADA business will dilute its ESS margin to 22-25% from 28% in Q1FY11. Thus, though the business mix will improve in FY12, the ESS business mix will change towards SCADA. Overall, we expect the EBIT margins to remain tightly held at 18.8% for FY11 and FY12. Since the earnings for the company is volatile, we have valued the company on the basis of trailing BVPS of Rs 150 i.e. 1x FY10. Since the stock has corrected significantly due to the laggard performance and liquidity concerns, it is currently trading at dirt cheap valuations i.e. 4.6x FY11E EPS and 3.9x FY12E EPS, which limits the downside. Thus, we have rated the stock as BUY with a target price of Rs 150 per share," says ICICIdirect.com.

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