Buy Sadbhav Engineering; target of Rs 336: Axis Direct

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26 Aug, 2025 12:21

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We met Sadbhav’s (SEL) management to discuss various investor concerns. Key takeaways:  Slow growth in last two years was primarily due to stuck projects in irrigation and payment issues in mining; the issues are now nearing resolution. SEL expects FY18 revenue to grow 14-17% YoY to ~Rs 38- 39 bn with Rs 13-15 bn from 7 HAM projects. Road EPC order backlog worth ~Rs 17 bn should be executed in FY18. Mining and Irrigation combined together should contribute Rs 7.5-8 bn.  SEL is targeting order inflow of Rs 60-70 bn in FY18 with 80-85% from road projects (equal share of EPC and HAM). Sadbhav has adequate capacity and equipment for concrete as well as bitumen roads and would require capex of only Rs 500 mn each in FY18, FY19.

We maintain our FY18/19 standalone EPS at Rs 14.6 and Rs 15.5. Our SoTP-based TP stands at Rs 336 (standalone at Rs 233/sh on 15x FY19E and BOT at Rs 103/sh).

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