Buy Sanghvi Movers; tgt of Rs 201: Anand Rathi Securities

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Buy Sanghvi Movers; tgt of Rs 201: Anand Rathi Securities

Anand Rathi Securities is bullish on Sanghvi Movers (SML) and has recommended buy rating on the stock with a target of Rs 201 in its February 15, 2011 research report.

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Anand Rathi Securities is bullish on Sanghvi Movers (SML) and has recommended buy rating on the stock with a target of Rs 201 in its February 15, 2011 research report.

"Sanghvi Movers (SML) has maintained its aggressive Rs 2.8-2.9 billion capex plan for FY11 as well as FY12e, indicating healthy demand prospects despite lower yields. We reduce our FY11e and FY12e earnings 12.8% and 16.1% respectively on account of lower yields, lowered capacity utilization and higher interest rates. Hence, we cut our target price to Rs 201/share from Rs 239."

"SML sees revenue de-growth of 2.3% yoy in 3Q (14.8% below our estimate), mainly owing to breakdown of some cranes and stoppage of work at sites where receivables were not cleared. SML invested ~Rs 370 million in 3QFY11 to acquire nine cranes, boosting its fleet to 356. 3Q EBITDA margin stood at 72%, contracting 349bps yoy, which is 13bps below our estimate. SML's 'other expenditure' increased 34%, to Rs 46.6 million, on lower revenue. Also, management indicated that it will write-off further bad debt of Rs 10-20 million in 4QFY11. Net profit de-grew 23.3% yoy owing to increased depreciation, which was up 18% yoy, and de-growth in topline. Earnings were 35% below our estimates."

"We cut our FY11e/FY12e yield, thereby cutting our topline (9.9%/10.6%) and earnings (12.8%/16.1%), due to lower yields, lowered capacity utilization and higher interest rates. We revise our target price downwards to Rs 201 from Rs 239, based on 9x FY12e earnings; maintain Buy for a target price of Rs 201," says Anand Rathi Securities research report.

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To read the full report click on the attachment