Buy Madhucon Projects; target of Rs 171: Angel Broking

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Buy Madhucon Projects; target of Rs 171: Angel Broking

Angel Broking is bullish on Madhucon Projects and has recommended buy rating on the stock with a target of Rs 171 in its January 31, 2011 research report.

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RELATED NEWS Buy Navneet; target of Rs 74: Networth Stock Broking Buy Siemens; target of Rs 907: Motilal Oswal Buy IRB Infrastructure; target of Rs 264: Angel Broking ALSO READ See previous views by Angel Broking See what other Experts & Brokerages are saying about Madhucon Projec See messages about Madhucon Projec Madhucon Projec BSE | NSE 30/05/12 Are Mutual Funds betting on Madhucon Projec?

Angel Broking is bullish on Madhucon Projects and has recommended buy rating on the stock with a target of Rs 171 in its January 31, 2011 research report.

"Madhucon Projects (MPL) reported broadly in-line numbers for 3QFY2011, with the surprise on the margin front. MPL's order book at 2.5x FY2011E revenues provides good revenue visibility. However, we are revising our numbers for FY2011 and FY2012 to factor in the lower top-line, other income and higher operating margins."

"MPL reported a decent 25.6% yoy growth in top-line to Rs 352.1cr, albeit lower than our expectation of 46.8% growth. OPM stood at 12.7% (12.4%) v/s our estimate of 8.8% mainly on account of lower subcontracting in the power segment. We had estimated weaker margins owing to the problems in Andhra Pradesh and higher share of power segment where MPL subcontracts majority of the work which dilutes margins. On the earnings front, the company posted modest growth of 6.0% to Rs 11.5cr as against our expectation of Rs 9.1cr. Earnings exceeded our estimate owing to higher OPM. MPL's order book at 2.5x FY2011E revenues provides good revenue visibility for the next couple of years."

"We believe the key triggers for MPL would be execution picking up in its development business and building an attractive asset portfolio before raising funds via IPOs. However, we expect the same to fructify in FY2012 and based on the market conditions prevailing then. Hence, we believe that till then the stock would be a sector performer and real value would be created only on unlocking at the subsidiary level. Employing the SOTP methodology, we have assigned a P/E of 10x on FY2012E earnings (Rs 89.9/share), valued the BOT projects on NPV basis (Rs 52.0/share) and other investments in Madhucon Infra and the real estate venture on BV (Rs 25.2/share and Rs 3.9/share respectively). We maintain a Buy on the stock, with a SOTP-based target price of Rs 171," says Angel Broking research report.

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To read the full report click on the attachment