Shriram EPC an outperfomer: Spark Capital

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Spark capital has given an outperformer rating to Shriram EPC with a target of Rs 416 in its March 24, 2008 research report." Shriram EPC (SEPC), with multiple growth levers in the form of integrated wind energy solutions, turnkey contracting in renewable energy space, biomass-based power generation and contracting services for core industries, is a well differentiated EPC contracting company. With a strong orderbook, profitable project execution track record, well-devised strategy for wind energy and a buoyant industrial investment scenario, we believe SEPC is ideally positioned to grow rapidly over the next 2-3 years".

"Given the start-up nature of the 1.5MW class wind-turbine venture, we have attached conservative probabilities to the roll-out and success of the venture. Still, we expect SEPC's earnings to grow at a CAGR of >120% over FY07-10E, given the opportunities to tap the ongoing capex in renewable energy, core industrial sectors and urban renewal. Given that the SEPC stock trades at a P/E multiple of 6.4x FY10E earnings, with further earnings upsides possible, we consider the stock to be an asymmetric bet on the upside. We arrive at our one year target price based on a P/E multiple of 12.0x on FY10E consolidated EPS of Rs 34.7. Accordingly, we expect the stock to trade at a price of Rs 416 per share. We initiate coverage with an OUTPERFORM rating with 87% upside from current levels, " says, Spark's research report.

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