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Punj Lloyd – Review and stock recommendation

December 19, 2006

Punj Lloyd Limited (PLL) is one of India’s best Construction and Infrastructure company. We are initiating coverage on PLL with a BUY recommendation and a 12 month target price of Rs 1,500. 50% upside from current levels.

PLL operates in India, Middle East, Africa and entire Asia. PLL mainly implements mega infrastructure projects. Some Key Statistics of Punj Lloyd Limited.

CMP – Rs 1018. Buy Upto Rs 1075.
52 week High / Low – 1254 / 544
Book Value – Rs 203.7
P/E for H1FY07 Annualized – 44
Equity : 52.22 crores. Face Value Rs 10

For H1, FY07, Punj Lloyd recorded a sales of Rs 2022 crores and a PAT of Rs 22.91. PLL management has guided for revenues of Rs. 5800 crores for FY07. Margins are likely to expand going forward as its acquired company Sembawang engineers and Contractors’ Operations are streamlined and larger number of higher margin urban infrastructure projects flow through.

Large and diverse order book: Punj Lloyd continues to have a large overseas exposure to tap potential opportunities across the globe, especially in the oil & gas and petrochemicals space. Punj Lloyd had an order backlog of INR 13394cr as at Sept-06 of which Rs. 12500cr is with an average duration of 2.5 years.

For FY07, We expect PLL to deliver a PAT of 220cr resulting in EPS of Rs 40. Compared to other infrastructure and construction stocks, PLL with a very strong management and execution track record is quoting at a forward P/E of mere 25. We recommend a BUY on Punj Lloyd Ltd with a target price of Rs 1,500.

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