Buy Tecpro Systems; target Rs 260: Unicon Investment

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Buy Tecpro Systems; target Rs 260: Unicon Investment

Unicon Investment is bullish on Tecpro Systems and has recommended buy rating on the stock with a target price of Rs 260 in its November 19, 2011 research report.

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Unicon Investment is bullish on Tecpro Systems and has recommended buy rating on the stock with a target price of Rs 260 in its November 19, 2011 research report.

"Tecpro Systems (Tecpro) has posted strong results in Q2FY12. Company's revenue grew 51% YoY to INR 4531 mn while on QoQ it was up by 29.6%. Robust growth in top line was due to the strong execution in all segments of the company. At the EBITDA level the company has registered a growth of 72.1% YoY to INR 520 mn while on QoQ it was up by 25.7%. Despite sharp increase in the contract cost the company was able to increase its EBITDA margin due to lower raw material expenses. EBITDA margin during the quarter has expanded by 140 bps YoY to 11.5% while QoQ it was down by minor 35 bps. Contraction in the EBITDA margin was due to the higher Contract cost. Net profit during the quarter has also shown a healthy growth of 66.2% YoY to INR 86 mn while on QoQ it was up by 60%. PAT margin also increased by 10 bps YoY to 1.9% during the quarter while on sequential basis it was up by 23 bps. Interest cost during the quarter increased by 84.6% YoY due to higher than anticipated interest on advances (~11%) and rise in working capital debt by 44% YoY to INR 9.2 bn. Increase in the Working Capital Loan was justified on back of rise in BoP project execution i.e. Kakatiya and Rayalaseema projects."

"Tecpro bagged order worth INR 6 bn during the quarter which leads to the total order book of INR 44.4 bn. The major of the order inflow was primarily from the material handling, cement & Steel sector. These included orders worth INR 5.2bn from BHEL for Ore/Coal Handling project for NMDC's Steel Plant and worth INR 793 mn from Ultratech Cement for Coal Handling systems. In Addition to this, the company bagged an order worth INR 4.1bn from NTPC for Extended Coal Handling Plant package for its coal mining block at Hazaribagh, Jharkhand. YTD order inflows till date stand at INR 12.1bn, with no BoP orders bagged during the period. Tecpro is also L1 in orders worth INR 10 bn from NTPC and private IPPs. Thus, Tecpro is aiming to book additional INR 30-35 bn orders in H2FY12. The company was quite confident of maintaining top line growth guidance of 35%-40% for FY12. The company also indicated better delivery and order booking in H2FY12 as majorly of the business get close in H2.We expect Tecpro to maintain order inflows and execution pace despite macro headwinds on back of diversified order inflows, on-track execution record and expected order inflow (~INR 10 bn of O/S L1 positions and finalization of large BoP order (~INR 20 bn) in H2FY12). At CMP, Tecpro trades at 6.4x of its FY13e earnings. We maintain our BUY rating with a price target of INR 260," says Unicon Investment research report.

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