Accumulate Sadbhav Engineering target of Rs 97: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Sadbhav Engineering

Sadbhav Engineering posted a weak set of numbers as execution fell 23% QoQ, considerably below our and street estimates. However, provision reversals and tax credits led to positive surprise on the bottom-line front. Toll revenues on 2 projects remain halted since Dec’20, due to farmer’s protest for which the company would be pursuing revenue loss claim and termination of projects. In order to aid liquidity position, company initiated monetization process of 2 BOT and 3 HAM projects. On the back of delayed commencement in new projects and headwinds caused by second wave, management gave muted guidance of 15-20% revenue growth in FY22 with EBITDAM expected to be in the range of 12-13%. SADE is one of the most reputed and credible EPC companies in the infrastructure space with strong execution track record. Pressures of stretched working capital cycle and mounting debt saw some easing through receipt of all ADs, receipt of three large orders and conclusion of asset monetization deal. However, on the back of 1) disappointing execution levels, 2) subdued management commentary and 3) a few slow-moving projects, we reduce our earnings estimates for FY22E/23E by 34%/30%.

Outlook

At CMP, the stock trades at a P/E of 21.5x/13x on FY22E/23E EPS and an EV of 10.6x/8.4x FY22E/23E EBITDA. Downgrade from BUY to ‘ACCUMULATE’ with a revised TP of Rs97 (Earlier TP Rs115).

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