Buy Sadbhav Engg; target of Rs 300: ICICIDirect

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26 Aug, 2025 12:21

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ICICIDirect's research report on Sadbhav EnggSadbhav Engineering’s (SEL) topline de-grew 11.3% YoY to | 858.0 crore (I-direct estimate: | 899.9 crore) mainly on account of a sharp decline in the revenues from transport division which fell 14.8% YoY to | 561.8 crore and from mining division which slumped 37.2% YoY to | 87.2 crore The EBITDA margin contracted 41 bps YoY to 9.5% and was lower than our estimate of 10.5% The bottomline grew 4.6% YoY to | 40.7 crore and was marginally above our expectation of | 38.2 crore despite a lower-than-expected operating performance mainly on account of lower-than-expected tax expenses (6.3% in Q4FY16 vs. our expectation of 20.2%) due to a tax write-back of | 14.1 crore in Q4FY16 Standalone debt was at ~| 1150 crore. In Q4FY16, SIPL repaid | 80 crore to SEL out of a total debt of | 610 from the sale of a stake in the Mumbai Nashik Expressway at | 90 crore. We like Sadbhav given the strong orderbook along with plethora of opportunities ensuring healthy earnings CAGR of 23.5% in FY16-18E. Furthermore, SEL has corrected 12% since our last HOLD recommendation on February 10, 2016. Hence, we upgrade the stock to BUY recommendation with an SOTP based price target of | 300/share. We have valued SEL’s 68% stake in SIPL at | 131/share and EPC business at | 169/share (8x FY18 EV/EBITDA implying 14.3x FY18 EPS).

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