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Geojit Financial
Power Mech (Buy)
Target: ₹727
CMP: ₹576.05
Power Mech Projects Ltd is a leading infrastructure-construction company based in Hyderabad with global presence. The company has an order backlog of ₹7,353 crore (as on February 16, 2021), which shows revenue visibility for next 3 years.
The company enjoys market leadership position in power O&M (Operations and Maintenance) and erection business with a market share of 55-60 per cent. Diversification of business to non power segment, especially civil (including railway, petro chemical, water etc) has helped the company to be in the growth track .
We expect order backlog to grow at 14 per cent with an average order intake of ₹3,500-4,000 crore per year. Revenue is expected to grow at a CAGR of 30 per cent during FY21-23 and ROE to be at 16.3 per cent by FY23.
With strong order inflow, diversification to non power segment and increased focus in O&M segment, we expect the company to be in its growth trajectory from Q4FY21 as company reached full execution level in December. At current levels, the stock is available at a bargain.
We initiate coverage on PowerMech with a Buy rating based on 6x FY23E earnings with a target price of ₹727.
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