Buy RPG Transmission: Edelweiss

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Buy RPG Transmission: Edelweiss

Edelweiss Research has maintained buy rating on RPG Transmission. Broking house, believe, RPGT is benefiting from the rapid pace of capacity ramp up in the ‘power T&D’ space in India. We are upgrading our EPS estimates by ~13% and ~2% to Rs 22 and Rs 27 for FY08 and FY09, respectively, driven primarily by improving profitability.

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RPG Transmissio BSE | NSE 01/01/70 Are Mutual Funds betting on RPG Transmissio?

Edelweiss Research has maintained buy rating on RPG Transmission . Broking house, believe, RPGT is benefiting from the rapid pace of capacity ramp up in the 'power T&D' space in India. We are upgrading our EPS estimates by ~13% and ~2% to Rs 22 and Rs 27 for FY08 and FY09, respectively, driven primarily by improving profitability.

Edelweiss Research report on RPG Transmission:

RPG Transmission (RPGT) declared impressive Q4 results with profitability surprising positively despite sub-par revenue performance. Q4FY07 revenues were up ~4% Y-o-Y at Rs 1 billion. EBITDA, at Rs 119 million, was up by ~9% Y-o-Y, while net profit, at Rs 100 million, was up ~166% Y-o-Y for the quarter. 

For FY07, revenue growth was encouraging at ~43% Y-o-Y to INR 3.7 bn. EBITDA, at Rs 427 million, was up by ~64% Y-o-Y, while net profit, at Rs 257 million, was up by 157% Y-o-Y for FY07. EBITDA margins expanded by ~60bps Y-o-Y to 11.8% in Q4FY07. However, on a sequential basis, EBITDA margin was down by ~60bps. The net margin was at 10%, up by ~610bps Y-o-Y, on account of write back of tax charges in the quarter. For FY07, EBITDA margins expanded by ~150bps Y-o-Y driven by operating leverage and improvement in project profile. Net margins improved by ~290bps Y-o-Y to 6.9% driven by lower interest expense and tax rate in FY07. Order backlog at the end of Q4FY07 was Rs 4.5 billion, implying an order intake of Rs 1.3 billion in the quarter, compared to Rs 2.1 billion in Q3FY07. The yearly order accretion increased by ~52% Y-o-Y to Rs 4.2 billion in FY07, reflecting robust demand traction. We believe, RPGT is benefiting from the rapid pace of capacity ramp up in the 'power T&D' space in India. We are upgrading our EPS estimates by ~13% and ~2% to Rs 22 and Rs 27 for FY08 and FY09, respectively, driven primarily by improving profitability. The stock is trading at a P/E of 10x and 8x our EPS estimates for FY08 and FY09, respectively. We continue to maintain our 'BUY' recommendation.