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Buy NESCO; target Rs 889: Firstcall Research

Firstcall Research is bullish on NESCO and has recommended buy rating on the stock with a target price of Rs 889 in its January 08, 2013 research report.

January 12, 2013 / 05:29 PM IST
 
 
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Firstcall Research is bullish on NESCO and has recommended buy rating on the stock with a target price of Rs 889 in its January 08, 2013 research report.


"NESCO provides forging hammers and presses, blow room lines & high production cards for the textile industry; and sucker rod pumps for on-shore oil recovery. The Company IT building 3 is completed and is expected to start generating revenue from the current financial year. Company expects significant growth in revenues in 2013-14. During the quarter, the robust growth of Net Profit is increased by 12.21% to Rs. 200.56 million. Revenue for the quarter rose 8.74% to Rs.378.35 million from Rs.347.94 million, when compared with the prior year period.


The Company plans to invest in construction of a new building & other capital expenditure to set up a Research and Development Centre for Indabrator, its Industrial Capital Goods Division. The Company has initiated steps to secure required approvals for starting construction of IT building 4, admeasuring about 1,200,000 sq ft. Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 6% over 2011 to 2014E respectively.


The company’s net profit jumps to Rs.200.56 million against Rs.178.74 million in the corresponding quarter ending of previous year, an increase of 12.21%. Revenue for the quarter rose 8.74% to Rs.378.35 million from Rs.347.94 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.14.23 a share during the quarter, registering 12.21% increase over previous year period. Profit before interest, depreciation and tax is Rs.286.77 millions as against Rs.267.38 millions in the corresponding period of the previous year.


At the current market price of Rs.794.20, the stock P/E ratio is at 14.84 x FY13E and 13.81 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.53.53 and Rs.57.52 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 6% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 10.02 x for FY13E and 9.34 x for FY14E. Price to Book Value of the stock is expected to be at 3.12 x and 2.54 x respectively for FY13E and FY14E.


The Company is plan to investing in construction of a new building and other capital expenditure to set up a Research and Development Centre for Indabrator, its Industrial Capital Goods Division. Construction of this new building is progressing well, besides several new equipment and facilities will also be installed. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 889 for Medium to Long term investment," says Firstcall Research report.


Shares held by Mutual Funds/UTI


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To read the full report click on the attachment

first published: Jan 10, 2013 03:31 pm

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