Buy Vascon Engineers; target of Rs 57: Kotak Securities

By Broker Research

Kotak Securities' research report on Vascon Engineers
Vascon Engineers (VEL) reported strong revenue growth in Q3FY18 due to high contribution from real estate business in the quarter. Net sales for the quarter grew at 84.8% yoy to Rs 935 mn with EBITDA turning positive at Rs.65mn and PAT going up to Rs.25 mn, which was inline with estimates. But the contribution from EPC segment was below our estimates at Rs 520 mn Vs estimates of Rs 571 mn as its new projects would contribute meaningfully from Q4FY18 onwards. VEL has external order backlog of Rs Rs 6.7 bn and internal order book of Rs 2.3 bn at the end of Q3FY18.


We expect the execution in the EPC segment to pick up from Q4FY18. Its subsidiary GMP is also doing well after exiting services business with Rs 1.18bn revenue in 9MFY18. EBITDA for the quarter turned positive to Rs 65 mn (Vs estimates of Rs 68 mn) with EBITDA margins at 6.9% which was lower than our estimates on account of higher expenses in real estate segment due to increase marketing spend and higher employee expenses in the real estate segment.

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