Buy Tecpro Systems; target of Rs 204: KRChoksey

KRChoksey is bullish on Tecpro Systems and has recommended buy rating on the stock with a target of Rs 204 in its August 16, 2012 research report.

“Tecpro systems registered strong net sales growth of 59.8% YoY. Operating margins were stable at 14%, while interest cost increased by 60.4% to Rs. 65 cr in line with sales growth. Other income decreased to Rs 1.7 cr vs Rs 2.9 cr in Q1FY12. Consequently PAT increased by 30.9% to Rs. 7 cr. Order backlog stands at Rs 4,320 cr. The company received orders worth Rs 739 cr during the quarter.”

“Tecpro registered strong execution as sales increased to Rs 558.2 cr. Material handling contributed 63% of the revenues followed by BOP constituting 29% and ash handling 8% of the total revenues. The company also maintained its operating margins at 14%, 18 bps increase on a YoY basis. Increase in interest cost was capped in-line with sales growth. For full year, management maintained its sales growth guidance of 20% and operating margins at similar levels of FY12. For Q1FY13, Tecpro registered strong order inflows worth Rs 739 cr vs Rs 201 cr in Q1FY12. Consequently, order backlog increased to Rs 4,320 cr as of Q1FY13 vs Rs. 4,150 cr in Q4FY12. Post Q1 FY13, Tecpro registered order inflows worth Rs 634 cr taking total order inflow to Rs. 1373 cr for the current fiscal. Power sector orders - AHP and CHP projects primarily contributed to growth in order inflows followed by international orders from Vietnam and Indonesia. The management has guided for order inflows in the range of Rs 3,500 to Rs 4,000 cr for FY13 on back of bids made for BOP projects, CHP/AHP projects, and orders from BHEL, NMDC steel plant MHE project and focus on international projects. A major BOP project is expected to be finalized by Dec 12.”

“At CMP of Rs. 153 Tecpro is trading at a P/E of 6.0x FY13E earning and 5.6x FY14E. Considering attractive valuations, strong order inflow in recent months, we assign a P/E of 8x to its FY13E EPS of 25.4 and recommend a BUY on the stock with price target of Rs 204,” says KRChoksey research report. 

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