Buy Pratibha Industries; target of Rs 68: SPA Research

SPA Research is bullish on Pratibha Industries and has recommended buy rating on the stock with a target of Rs 68 in its August 14, 2012 research report.

“Pratibha Industries(PIL) declared strong set of numbers for the quarter ended June 12, which were in line with our estimates. While the company reported a topline growth of 55.4% to INR 5598 mn driven by strong execution of order book, sharp surge in interest and depreciation expenses restricted the net profit growth by 22.2% to INR 228 mn. Operating margins improved by 107 bps aided by its high margin water projects. Order inflow remained strong as PIL booked orders worth INR 15 bn leading to total order book INR 66 bn (3.5x TTM revenues), thereby ensuring healthy revenue visibility for the next couple of years. We retain our BUY recommendation on the stock with a target of INR 68.”

“EBIDTA in Q1FY13 grew at faster pace by 67.7% to INR 821 mn largely on the back of 107 bps improvement in operating margins to 14.3% owing to execution of high margin water projects. Commencement of revenue recognition from some of the large projects bagged in the last financial year also aided in margin improvement."

"PIL has a robust and well diversified order backlog of ~INR 66 bn (3.5x its TTM revenues) as on June 12 with an average execution period of 30 months, which offers strong revenue visibility for PIL over the next couple of years. 40% of orders are from water space, 25% from urban infra and 35% are from building. Order inflow remained strong at INR 15 bn in the last quarter (from tunnelling and building segment) The company has placed bid for several projects and is L1 in projects worth INR 22 bn. Going forward we expect the company to maintain an order inflow run rate of ~INR 40 bn in each of the next two years, which would lead to 23% CAGR in order backlog over FY12-14E.”

“We remain positive on the infrastructure sector and PIL with proven track record & efficient project delivery mechanisms is expected to be one of the prime beneficiaries of emerging opportunities in the sector. With the expected economic recovery, we expect sharp rerating of the stock with market pricing in its focussed approach, strong order backlog and sustainable high margins,” says SPA Research report.

Shares held by Mutual Funds/UTI

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