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Geojit Financial
Power Mech Project (Buy)
Target: ₹1,163
CMP: ₹952.15
Q1-FY22 revenue grew by 56 per cent y-o-y, however, it was below our estimate as the execution was impacted due to the rainy season. The civil & erection segments sales grew by 121 per cent y-o-y/ 117 per cent y-o-y.
Though the company didn’t bag any orders in Q2-FY22, the order book remains robust at ₹15,809 crore, which is 6.5x TTM revenue (including ₹9,294 crore of mining order). EBITDA margin stood at 10.7 per cent (vs –12.3 per cent in the previous quarter last year) due to 1,742 bps improvement in the gross margin.
Management expects execution to pick-up in H2-FY22 and has targeted to achieve ₹2,600 crore of revenue in FY22 with 12.5 to 13 per cent margins. The order in the key verticals like erection, electrical and civil remains muted due to delay in finalisation of orders. The company is looking for opportunities worth ₹10,000 crore in energy, infra, metals, railway, mineral sectors.
With the robust order book and an expectation of strong execution in the coming quarters, we revise our rating to Buy and value the stock at a P/E of 7.5x FY23 earnings with a target price of ₹1,163.
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