Buy Sadbhav Engg; target of Rs 333: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Sadbhav EnggSadbhav Engineering (SEL) reported revenues of Rs8.5bn below our estimates (PLe: Rs8.9bn), down 11% YoY. Revenues from Roads, Mining and Power segment were down by 15%, 37% and 10% YoY, respectively, while revenues from Irrigation were up by 23% YoY. Execution in road was down as few newly bagged projects did not reach revenue booking stage (10% threshold). EBITDA was down by 15% YoY to Rs814m (PLe: Rs931m. Also, EBITDA margins dipped by 40bps YoY to 9.5% (PLe: 10.4%). Margin were impacted as SEL wrote‐off subcontractor advances worth Rs189m This was partly offset by Rs98.5m of excess provision being written‐back on account of labour cess. Adj. PAT was up by 28% YoY to Rs498m (PLe: Rs393m) mainly on account of lower tax rate and higher other income. Higher other income was aided by Rs125m of equipment rental from SEL’s subcontractor GKC and Rs53m interest income on tax refund (of Rs141m). SEL expects to achieve sales growth of 15‐16% and EBITDA margin of 10.5% for FY17. The stock is trading at core PE of 11x FY18E earnings. We continue to believe SEL will be the key beneficiary of strong outlook in road sector and improving outlook in Mining and Irrigation sector. Healthy balance sheet and strong management pedigree gives us additional comfort. We expect company to deliver 26% earning CAGR over FY16‐18E. We continue to rate the stock a “BUY”.

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