Buy Pratibha Industries; target of Rs 56: Sushil Finance

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Buy Pratibha Industries; target of Rs 56: Sushil Finance

Sushil Finance is bullish on Pratibha Industries and has recommended buy rating on the stock with a target of Rs 56 in its February 14, 2012 research report.

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Sushil Finance is bullish on Pratibha Industries and has recommended buy rating on the stock with a target of Rs 56 in its February 14, 2012 research report.

"Pratibha Industries, strong order-backlog coupled with better execution resulted in Revenue growth of ~53% YoY from Rs.2942 mn in Q3FY11 to Rs.4508 mn in Q3FY12. Of the total revenues in Q3FY12, ~54% was contributed by water infra followed by buildings & urban infra which contributed ~38% & 8% respectively. Revenues in 9MFY12 grew by ~30% from Rs.8795 mn in 9MFY11 to Rs.11471 in 9MFY12. Operating profit grew by ~28% YoY to Rs.583 mn in Q3FY12, while margins dipped by 250 bps to 12.9% which was mainly on back of higher employee cost which increased by 125% to Rs.312 mn. Higher employee cost was on account of hiring of ~150-200 employees for their new projects. Operating profit for 9MFY12 increased by 21% to Rs.1526 mn whereas margins declined by 100 bps to 13.3%. Net profit grew by ~35% YoY from Rs.142 mn in Q3FY11 to Rs.191 mn in Q3FY12 whereas margins declined by ~60 bps to 4.2% which was majorly due to higher interest cost which increased by ~43% YoY to Rs.300 mn. In 9MFY12, net profit grew by 23% from Rs.440 mn in 9MFY11 to Rs.540 mn in 9MFY12 whereas margins were marginally down by 30 bps to 4.7%. EPS for Q3FY12 & 9MFY12 stood at Rs.1.9 & Rs.5.4 respectively."

"PIL has robust order-book position of ~Rs.61.6 bn (4.8x FY11 Revenues) which is executable over a period of 30-36 months, thus providing strong revenue growth visibility over the next few years. Apart from the above O/B position, the Company is L1 in contracts worth Rs.6 bn. Also the Company has outstanding bids to the tune of Rs.18 bn. Of the total O/B position, ~52% is attributed towards Water Infra, 37% is from buildings while the remaining comes from urban infra. The Company has been successful in bagging contracts worth ~Rs.33 bn in 9MFY12 (~90% of FY11 O/B) which is highest ever in the history of the Company. Under the proposed Scheme, Pratibha Pipes and Structural Limited (PPSL) would be merged into PIL and the manufacturing undertaking (PPSL & Saw Pipe Division) would be hived off from the Company into New Company (100% Subsidiary)(subject to approval of shareholders & court). PPSL is a promoter group company (84% stake) which is engaged in heavy engineering/fabrication. At present the restructuring appears EPS neutral & hence would factor in the same once it's approved by the court."

"PIL has reported good set of numbers for the quarter ended December'11 which were above our expectations. Robust order-book position coupled with strong execution capabilities provides good revenue visibility over the next few years. At the CMP of Rs.46, the stock is quoting at 4.9x & 0.7x its FY13E EPS and BV of Rs.9.3 & Rs.64 respectively. Considering the robust performance & strong growth prospects of the Company, we have upward revised our earnings estimates for FY13E by ~5% to Rs.9.3. We recommend 'BUY' on the stock with a revised target price of Rs 56," says Sushil Finance research report.

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