For Q4FY2019, SEL’s standalone net revenue was affected by slow execution in HAM and EPC projects. Better operating margins were negated by the increased effective tax rate leading to decline in standalone net earnings. SEL’s revenue for FY2020 hinges upon the receipt of appointed dates for 31% of its order book which stands strong at Rs. 11,981 crore, 3.4x its FY2019 standalone revenue. The key positive trigger apart from receipt of appointed dates is fructification of monetization of assets of its listed subsidiary SIPL which will significantly deleverage its balance sheet along with receipt of loans and receivables advanced to SIPL.
OutlookWe retain Buy on Sadbhav Engineering with a revised SOTP based price target of Rs. 285 on account of lower revision in estimates for FY2020 and FY2021.
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