Asit C Mehta picks Indo Tech; target Rs 612
MUMBAI: Asit C Mehta has revised the target price of Indo Tech to Rs 612 from Rs 663, which is equivalent to a P/E multiple of 12 times to its FY10E EPS. For the fiscal ending March 31, the company reported net sales growth of 22 per cent to Rs 189.86 crore, while net profit grew by 49 per cent to Rs. 39.02 crore. On the back of higher realisations and raw material cost management, operating margins for the year improved to 29.7 per cent compared with 24.3 per cent during 2006-07.
In volume terms, the company sold 2718 MVA of transformers, against 2300 MVA in 2006-07, a growth of 18 per cent. During the year, realisation per MVA, grew from Rs 0.67 million to Rs. 0.69 million. For the full year, sales to SEBs accounted for 80 per cent (84% in FY07), while industrial customers accounted for 20 per cent (16% in FY07) of the sales.
For Jan-Mar 2007-08, Indo Tech reported net sales of Rs 47.02 crore, which was lower by 17 per cent compared with Jan-Mar 2006-07. Net profit for the quarter was Rs 9.67 crore, lower by 6 per cent compared with Jan-Mar 2006-07. Operating margin for the quarter improved to 31 per cent from 27.1 per cent during Jan-Mar 2006-07.
In volume terms, the company sold 688 MVA of transformers, compared with 738 MVA in Jan-Mar 2006-07. Lower volumes for the quarter are attributable to, a part of manpower at the old power transformers plant being deployed for training and synchronizing the operations at the green field- 4000 MVA power transformers facility. Realisations for the quarter were at Rs 0.68 million per MVA compared with Rs 0.77 million during Jan-Mar 2006-07.
The company has current order backlog of around Rs. 159 crore (2030 MVA) compared with orders worth Rs 180 crore (2315 MVA) at the end of Oct-Dec 2007-08. According to the company, around Rs 40-50 crore worth of orders from various SEBs are expected to be finalized during next two months. Current order backlog which is less than the order backlog at the end of earlier quarter is pointing at a slower order intake during Jan-Mar 2007-08. Based on the orders that the company has bid for, it expects the order intake to pickup by the end of the current calendar year.
While the brokerage maintains their sales and profitability projections for the company, they have reduced their target P/E multiple for Indo Tech to 12 from 13. While the brokerage expects demand for transformers to remain strong over medium to long term, they have reduced their target P/E multiple to account for company’s lower order book, due to project delays being witnessed in the sector.
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