Buy TD Power Systems; target of Rs 696: Emkay

Emkay's research report on TD Power Systems

"TDPS is all set to reap the benefits of its focus on international business and the expanded capacities in the next few years. With its tie-ups with OEMs like GE and Voith Hydro, we expect a substantial ramp up in revenues (17% CAGR) and profitability (60% CAGR) over FY14-17E. We expect the improvement in profits to translate into higher dividend payouts given TDPS' low capex requirements and zero net debt. We have valued the company at 25x FY17E earnings. Given its strong growth profile and healthy balance sheet, we feel these multiples are justified. We initiate coverage on the stock with a BUY rating and a price target of Rs 696. Any revival in the domestic capex cycle is an added bonus."

"We have compared TDPS with similar companies in the turbine generator (TG) space. At the current market price, TDPS discounts it two year forward earnings at 15x, which is at a 40% discount to its nearest peer, Triveni Turbines. We recommend a Buy on TDPS with a price target of Rs 696/share, valuing the company at 25x its FY17E earnings", says Emkay Global Financial Services research report.

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