Dear All,
Forwarding you the Result Update on Patel Engineering for 4QFY2011 with a Neutral recommendation.
For 4QFY2011, Patel Engineering (PEL) posted disappointing numbers on a consolidated and standalone basis. Going ahead as well, we believe recovery to the growth path will take time as order inflow concerns loom large and the current order book is plagued with delays. Hence, we are revising our estimates further for FY2012 and FY2013. Also, the company is yet to provide for the recent IT raid (which would accrue in the next few months, thereby increasing the tax rate going ahead); and the hedging loss incurred due to project cancellations, which we believe would materialise and impact the company’s financials. Hence, we maintain our negative stance on the company and Neutral rating on the stock.
One more disappointing quarter on the operating front; no respite in sight: For 4QFY2011, on a consolidated basis, PEL posted growth of 33.4% yoy and 267.4% qoq in net sales primarily due to real estate revenue booking and low margin outside work. EBITDA margin came in at 8.1% (450/530bp yoy/qoq decline) due to Jogeshwari property sales – adjusting this, EBITDA margin would have been at 3–4%. Reported PAT declined by 50% for the quarter.
Outlook and valuation: PEL’s core C&EPC business is currently facing headwinds with its large projects facing delays and disappointing order inflow. Further, the longer gestation nature of its order book, macro headwinds and increasing debt levels put the company’s growth visibility for the next few quarters under doubt. Hence, we maintain our Neutral rating with a revised fair value of `143/share. Key risks to our recommendation are 1) pick-up in order inflow from the power segment in the near term; 2) early-than-expected execution from its slow-moving orders; and 3) raising of capital and the resultant decline in debt levels.
Kindly click on the following link to view the Report.
Patel Engineering - RU4QFY2011
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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