Buy Sadbhav Engineering; target of Rs 351: Prabhudas Lilladher

Weak execution largely a timing issue: Sadbhav Engineering (SEL) reported standalone revenues at Rs8bn, down by 2.7% YoY. Revenues from Roads and Power segment were up by 10.7% and 19% YoY, respectively, while Irrigation and Mining were down by 16% and 40% YoY respectively. EBITDA was down 3% YoY at Rs868mn, while EBITDA margins were flat YoY at 10.8%. PAT was up 20% YoY to Rs487m mainly on lower tax rate and higher other income. SEL expect pick up execution of road EPC projects and contribution for new HAM project to help pick up in execution over the course of the year. SEL expects to achieve sales growth of 15-16% and EBITDA margin of 10.5-11% for FY17.

The stock is trading at core PE of 12.5x 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 gives us additional comfort. We expect company to deliver 26% earning CAGR over FY16-18E.  We continue to rate the stock a "BUY" With revised TP of Rs 351 (Previous Rs 333).For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.