Buy Mcnally Bharat; target of Rs 188: SPA Research

SPA Research is bullish on Mcnally Bharat and has recommended buy rating on the stock with a target of Rs 188 in its August 13, 2012 research report.

“Mcnally Bharat came out with strong standalone set of numbers in Q1FY13 on the back of strong order backlog. While the topline was inline with our estimates at INR 4231 mn (+17.5% YoY), bottomline was marginally higher at INR 87 mn (+14.3% YoY) aided by better operational performance. The company witnessed sharp surge in order bookings (+2.5x to INR 11.8 bn) leading to total order backlog of INR 40.5 bn, which provides healthy revenue visibility for the company over the next couple of years. We maintain our BUY rating on the stock with a target of INR 188.”

“MBECL reported a standalone revenue growth of 17.5% to INR 4231 mn which was in inline with our estimates on the back of healthy order execution. The infrastructure sector dominated the revenue mix, contributing 48% to revenues in Q1FY13 with steel, mining & port sector contributing ~44%. EBIDTA margin improved by 117 bps to 7.9% in Q1FY13 and this is the highest margin clocked by MBECL since past 18 quarters. Margin improvement is due to decrease of 163 bps in proportion of other expenses to 8.9% in Q1FY13. This resulted in EBIDTA growth of 44.6% to INR 365 mn. However sharp increase of 84.2% in interest cost coupled with 40.2% surge in depreciation expenses restricted net profit growth to 14.3% at INR 87 mn.”

“Infrastructure sector remains a long term play and MBECL with rich product portfolio and presence across the core sectors of economy is best placed to benefit from the improving economic scenario. We expect the company to maintain sustainable growth rate both in its top line and bottom line based on its healthy order book position and considering the expected investments in its participating sectors of activity. At the CMP of INR 93, the stock trades at a P/E and EV/EBIDTA of 3.5x and 3.7x respectively its FY14E earnings. We retain our BUY rating on the stock with a target of INR 188,” says SPA Research report.

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