Hold Bilpower; target Rs 205: Firstcall Research

" At the market price of Rs.177.65, the stock is trading at 11.53 x and 10.18 x for FY10E and FY11E respectively. On the basis of EV/EBDITA, the stock trades at 6.77 x for FY10E and 6.75 x for FY11E. Price to book value of the company is expected to be at 1.38 x for FY10E and 1.21 x for FY11E respectively.

EPS of the company is expected to be at Rs.15.41 and Rs.17.45 for the earnings of FY10E and FY11E respectively. The company’s net sales are expected to grow at a CAGR of 17% over FY08 to FY11E.

The Board of Directors of the Company has approved demerger of Wada unit of Bilpower Ltd. and the said unit to be transferred to Bil Energy Systems Ltd., subsidiary Company, in terms of a Scheme of Arrangement between the Company and Bil Energy Systems Ltd.

Bilpower's subsidiary Tarapur Transformers is planning to tap capital markets. It has filed a draft red herring prospectus (DRHP) with Securities & Exchange Board of India (SEBI).

The company has declared a dividend at the rate of INR 1.80 per equity share of the face value of INR 10 each for the financial year ended March 31, 2009.

In the coming year, the Company plans to consolidate its business of Lamination by concentrating on the Lamination required for higher rating transformers and on the customers having pan India presence as well as global presence. The company signed a contract with the Ministry of Energy, Government of Ghana.

Transformers being the key components in the Transmission and Distribution (T&D) space, it would result in huge investment opportunity for Transformer Industry. The increase in focus by the Government to increase the power generation & reduce the T&D losses will result in the huge replacement demand as well as demand for new Transformers in the future.

We recommend ‘HOLD’ with a target price of Rs.205.00 for long term." says Firstcall Research report.

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