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 May 29, 2012 research report.

“Tecpro systems registered net sales growth of 14.5% as net sales increased to Rs 1,100 cr. Growth in sales was below our expectation on account of procedural delays and issues related to clearances which impacted execution. Company registered healthy EBIDTA margins of 19.7%, above our expectation. As a result, growth in EBIDTA was in line with our expectations; EBIDTA grew by 8.7% to Rs. 216.5 cr. However, interest cost increased sharply by 53% to Rs. 63.4 cr on account of higher borrowing cost, interest on advances and stretch working capital. Consequently PAT declined by 12.3 % to Rs 93.6 cr. Current order backlog stands at Rs 4,400 cr.”

“For FY12 order inflows declined to Rs 2,200 cr vs Rs Rs.4,350 cr in FY11. Consequently order backlog declined to Rs 4,150 cr as of Q4FY12 vs Rs. 4,371 cr in Q4FY11. However, post FY12, Tecpro has received strong order inflows in excess of Rs 500 cr as it received orders from NTPC and cement sector. Taking into consideration these orders current order backlog stands at Rs. 4,400 cr. In addition, Tecpro is L1 in orders worth Rs. 162 cr. Orders in pipeline/ bids made/ to be made include 5 to 6 CHP/ AHP projects and couple of BOP projects. Management has guided for an 18% to 20% growth in sales and margins to be maintained at current levels. However, considering considerable delays order finalizations and issues in power sector we expect sales to grow by 14%. We also expect EBIDTA margin to decline to 14% on account of significant competition and lull in order inflows, which has resulted in aggressive bidding for new orders. Consequently we expect PAT to increase by 5% in FY13.”

“At CMP of Rs. 162. Tecpro is trading at a P/E of 6.6x FY12 earning and 6.4x FY13E. Considering attractive valuations, strong order inflow in recent month we assign a P/E of 8x to its FY13E EPS of 25.5 and recommend a BUY on the stock with price target of Rs 204,” says KRChoksey research report.   

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