Buy Valecha Engineering: P-Sec

P-Sec report on Valecha Engineering:

"VEL announced an 84% y-o-y growth in the topline and 133% y-o-y growth in the bottomline in Q2 FY07. Rising commodity prices and increasing staff costs are the two reasons, which have hit the margins to 7.45 in Q2FY07. The company expects a good performance in Q3FY07 and Q4FY07 since 60% of the revenues incur in these two quarters. The current order book of the company is Rs 8bn, of which 75% of its order book comprises road projects, which include NHAI works. The average execution period of the order book is expected to be between 20 to 24 months. In Q2FY07 VEL acquired 2 new road projects worth Rs 95 crore at Madhya Pradesh."

"VEL is also planning to venture into BOT projects as a long-term strategy for growth and stability. Entering into BOT projects will boost the revenue growth of the company. At CMP of Rs 210 the stock trades at 18.19x FY07P and 11.13x FY08P earnings. With an additional value of its investments in Jyoti Infrastructure worth Rs 25 we maintain a Buy with a price target of Rs 285."