Sanju Verma bullish on Sadbhav Engineering

Sanju Verma, MD & CEO of Violet Arch Capital Advisors is bullish on Sadbhav Engineering. "This is one of the few midcap players which actually have an return on equity (ROE) and Return on invested capital (ROIC) of something like 18 to 20 percent which is every comforting," Verma reasoned.

Verma told CNBC-TV18, "Suzlon Energy is something I would clearly stay away from at this point in time. I think within midcaps there is so much to pick and choose from. I don’t think there is any particular reason at this point in time to go ahead and buy Suzlon. If I have to stick my neck out and buy something within the capital good space, within the midcap arena I would rather go and buy Sadbhav Engineering, where there has been positive news flow last week. They have got land and environmental clearances for some of their projects. We ourselves had taken out a report last June where we were targeting something like Rs 179 for the stock." He further added, "It is a different story that Sadbhav Engineering thereafter has been hovering in the region of Rs 111 to Rs 115 but what if it were to go back to Rs 150 or Rs 160 in a year from now, It would be trading at less than 8 times one year forward. I have always maintained, within the capital good space which includes infra players, power players, it is time now to shift from players who are into the contracting business to asset owners and there I think players like Sadbhav Engineering tend to score. While it is true that the government has done at even a fraction of the 9500 kilometers odd that it was to award by way of road projects which would have benefited something like Sadbhav Engineering." "I am inclined to believe that in the first half of the coming fiscal if not 3,000 kilometers which is what the finance minister said in the Budget – even if we do half of that, 1500 kilometers then asset owners like Sadbhav Engineering certainly tend to benefit. This is one of the few midcap players which actually have an return on equity (ROE) and Return on invested capital (ROIC) of something like 18 to 20 percent which is every comforting. And they have a road portfolio of something like 700 to 750 kilometers and the CAGR growth that we are talking of in toll receipts for the next two to three years should easily be 50 to 60 percent on conservative estimates. But, within the midcap space at this point in time that is one story that I am tracking closely and I am particularly bullish on," Verma added.