Buy Sadbhav Engg; target of Rs 295: Emkay

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26 Aug, 2025 12:21

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Emkay's research report on Sadbhav EnggThe company reported revenue of Rs8.58 bn -11.3% YoY higher than our expectation of Rs8 bn as execution run rate was faster than expected in captive BOT and irrigation projects. EBITDA came in at Rs814 mn -15% YoY versus expectation of Rs825 mn as EBITDA Margin came at 9.5% -41 bps YoY, -32 bps QoQ versus expectation of 10.3% due to change in revenue mix with lower execution of higher margin Mining projects and higher execution of low margin Irrigation projects.We have reduced our FY16E/FY17E EPS estimates by 13.4%/10.1% as we reduce our revenue growth and margin assumptions. Given current order book can help sustain Rs35 bn plus of EPC revenue for FY17E, however order intake remains crucial to sustain the growth in the EPC segment where the visibility remains high. We believe consistent cash flow generation to continue in EPC business and BOT portfolio to be cash break even in FY18E (Steady cash generation from this portfolio from FY18E will more than take care of any shortfall in funding new projects). Any correction should be used as an opportunity to buy. Revised target price to Rs295/share.

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