Angel Broking neutral on Sadbhav Engineering

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26 Aug, 2025 12:21

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Angels Brokings's research report on Sadbhav EngineeringConsidering recent order wins and strong 1HFY2016 execution, we model revenue estimates of `3,481cr/`4,219cr for FY2016E/ FY2017E, respectively. Given the low competitive intensity for recently won Road EPC projects, cool-down in bitumen and aggregate prices (as captive BOT projects have fixed price contracts), we expect EBITDA margins to expand by 53bp during FY2015-17E to 10.8%. Further, we model conservative other income numbers and low tax rate for FY2016/2017E at `13/14cr and 24%, respectively. Accordingly, we expect SEL’s PAT margin to expand by 109bp during FY2015-17E to 5.1%. We value SEL using Sum-Of-The-Parts methodology. We value standalone entity on P/E multiple of 15.0x its FY2017E EPS of `12.4cr, resulting in value of `187 per share. We value BOT projects individually using Free Cash flow to Equity holder’s method. Our value for SIPL’s portfolio of BOT projects comes to `141/share, which is 43% of the overall SOTP value for the company. On combining the value of EPC business and BOT projects, we arrive at a combined business value of `328/share, reflecting limited upside in the stock price from current levels. Accordingly, we maintain Neutral rating on the stock.

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