Buy ISGEC Heavy Engineering: target of Rs 350: ICICI Securities

ICICI Securities research report on ISGEC Heavy Engineering

ISGEC Heavy Engineering is currently at an inflection point in terms of transition towards higher proportion of turnkey contracts and execution of projects in diversified segments like emission control, factory construction, coal handling etc, which are relatively new segments for the company. The working capital intensity is likely to increase in the near term due to change in mix towards EPC and FGD; however, we believe, the company has strong balance sheet to manage the same. Delay in the sale of the Philippines factory and high remuneration by promoters (~11% of PBT) are certain risks keeping the valuation at lower levels.

Outlook

Given the healthy growth and order intake outlook, we maintain our BUY rating with a revised SoTP-based target price of Rs350 vs Rs330, previously.