Buy Patel Engg; target of Rs 572: Sushil Finance

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Buy Patel Engg; target of Rs 572: Sushil Finance

Sushil Finance is bullish on Patel Engineering and has recommended buy rating on the stock with a target of Rs 572, in its February 04, 2010 research report.

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Sushil Finance is bullish on Patel Engineering and has recommended buy rating on the stock with a target of Rs 572, in its February 04, 2010 research report.

"Patel Engineering Company has a strong order book which gives clear visibility for next two years. The strong thrust on infrastructure and irrigation projects has enabled its topline to grow at a robust pace. Q3FY10 results have been in line with our estimates, however, due to delay in payments from Andhra Pradesh we believe that the new order intake from Andhra Pradesh could slow down. Thus we have reduced our FY11E core business earnings estimates. We have also introduced FY12 estimates. We believe that PEL's net revenues will grow at 19% CAGR over next two year to Rs 42,923 million. We have estimated its FY12 APAT at Rs 2,605 million."

"We have valued its consolidated earnings at 10x its FY12E core earnings of Rs. 37.3. On the real estate front, we continue to conservatively value just the land bank (excluding projects under construction) at Rs.150 per share (i.e. at a 50% discount to the valuation done by M/S DTZ on a "as is where is" basis). We have considered its investment until date of Rs.3.4 bn in Power projects at just 1x its book value. On SOTP basis, we value the business at Rs 572 per share. We retain our Buy rating on the stock with target price of Rs 572," says Sushil Finance research report.

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