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Buy Techno Electric – SBI Caps

May 8, 2008

Techno Electric company has posted its Q4FY08 performance, which saw an improvement in all its divisions. The stock is in for a re-rating on the back of continued strong order inflow, huge order backlog and timely execution capability.

Techno Electric order backlog stood at Rs. 8,500 mn as on FY08. The total backlog is 2x of FY08 revenues. The company has bid for more than Rs. 2,500 mn till date.

In FY08, net sales showed a rise of 21.77% to Rs.4294.2 mn over the corresponding period of the previous year. EBITDA showed a rise of 37.36% to Rs.506.30 mn and net profit jumped by 77.61% to Rs.497.95 mn over the corresponding period of the previous year. Considering the buoyant industrial outlook, expect the company’s revenue to grow by a CAGR of 28% over the next two years.

Techno Electric trades at a P/E of 19.18x and 15.67x its FY09E and FY10E EPS of Rs.10.74 and Rs.13.15, respectively. On an EV/EBITDA basis the stock trades at 15.13x and 11.49x, our FY09E and FY10E earnings, respectively. SBI Caps recommends a buy on the stock with a price target of Rs. 263 implying upside of 28%.

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