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BUY Patels Airtemp India

December 8, 2007

Patels Airtemp India, which manufactures heat exchangers, pressure vessels, industrial fans and blowers and other heattransfer-technology products, would benefit from the ongoing boom in its user industries such as oil and gas, refineries, power, cement, and fertilisers. The heating, ventilation and air conditioning (HVAC) business, where the company undertakes turnkey projects and manufactures HVAC equipment is also expected to benefit from the ongoing retail boom.

The company has a healthy order book of Rs45 crore, out of which Rs40 crore is executable over the next six months.expect new order booking of~Rs70 crore in FY2008, which should increase to ~Rs120 crore by FY2009, while the momentum is expected to continue considering the current buoyancy in its user industries.

Expect a strong improvement in its return ratios going forward on the back of improved margins and no major capex requirement in the next two years. We estimate the topline to grow at a compounded annual growth rate (CAGR) of 49.1% and the bottomline to grow at a CAGR of 72.7% between FY2007-09.

At the current market price, the stock discounts its FY2009E earnings by 5.9x and quotes at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.5x. Sharekhan recommends a BUY with a Target price of Rs 135.

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