Buy Sadbhav Engineering; target of Rs 251: PLilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher`s research report on Sadbhav Engineering“Sadbhav Engineering (SEL), one of the leading players in the Infrastructure/Road sector, has its presence in the Mining and Irrigation segment. The company owns 13 road Build, Operate and Transfer (BOT) projects. Healthy order book (Rs83bn, 3.5x FY14 sales) provides strong visibility and an improving outlook across all its segment augurs well for future growth. Limited commitment on the current BOT portfolio and well-funded balance sheet makes it well placed to benefit from improved ordering in the Road sector. We initiate coverage on the stock with ‘BUY’ with a price target of Rs251, 19% upside from the current levels.” “SEL currently has an order book of Rs83bn which is 3.5x FY14 revenue, providing strong revenue visibility. Order book is well diversified across sectors like Road, Mining and Irrigation which are the key focus areas of the new government. We expect the EPC segment to post sales and earnings CAGR of 21% and 14%, respectively, over FY14-16E. We expect order book and order inflow to grow at CAGR of 10% and 38%, respectively, over FY14-16E. SEL has a portfolio of 13 road BOT assets, consisting of eight operational projects, one partially operational and four under various stages of construction. The company has till date invested equity of Rs13.5bn and have a balance equity commitment of Rs2.9bn to be infused over the next 24-30 months. Outstanding equity commitment is likely to be funded through cash flow from the standalone construction business and securitization of operational BOT projects. We expect the toll collection to grow at 30% CAGR over FY14-16.  Our FY16 NPV for BOT assets works out to Rs154 per share. We have valued the EPC business at PE of 10.5x FY16E PAT,” says Prabhudas Lilladher research report.

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