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| 1. Rajan 2/9/2010 10:09:44 AM IST |
Price @BSE - Rs 0.00
when posted |
Buy@ Rs 164.00 For target of Rs 205 In 2 Months.
Angel Broking has come out with a research report on Madhucon Projects (MPL). The research firm has recommended a buy on the stock.
"MPL has a current order backlog of Rs 4,600 crore, which is bifurcated into four divisions: irrigation (33%), roads (31%), power (19%), real estate (13%) and mining (4%), with an average execution period of 36 months. We believe that the company would see good order traction from the road (through winning BOT projects) and power (through achieving financial closure for its power division, mainly Phase II) segments", says Angel Broking.
The report also says, "However, the management has said that the payment from the AP government has slowed after the untimely demise of the CM, which would not only impact its top-line growth but would also entail a hike in the interest cost, due to working capital loans. Therefore, we have pruned our top-line estimates marginally for FY2010E and FY2011E by 3.2% and 2.0%, respectively. Also, we have factored in higher working capital loans, which have increased our interest cost estimate. Therefore, our bottom-line estimates stand reduced by 7.9% and 6.7% for FY2010E and FY2011E, respectively."
"We are expecting the company to post a top-line and bottom-line CAGR of 24.7% and 30.2%, respectively, over FY2009-11E, which would mainly be driven by the current order book and internal order flows. We have valued MPL on an SOTP basis, by valuing its core construction business at 10x, at discount to its listed peers owing to scale of operations, on FY2011E Earnings (contributes Rs 107.4/share to our target price). Its stake in Madhucon Infra contributes Rs 93.6/share. We continue to value its land parcel at a 50% discount to acquisition costs, and it contributes Rs 3.6/share. Our SOTP target price stands revised at Rs 205 (Rs 142); therefore, we recommend a buy on the stock." |
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