Buy Bharat Bijlee for target Rs 1,747: Sharekhan
Sharekhan has maintained 'hold' on Bharat Bijlee for a revised price target of Rs 1,747.
By ET Online |
MUMBAI: Sharekhan has maintained 'hold' on Bharat Bijlee for a revised price target of Rs 1,747. During Apr-Jun 2008-09 the net sales of Bharat Bijlee declined by 8.6 per cent to Rs 105.6 crore. The sales declined mainly due to disruption in production and non-shipment of one of the orders.
The operating profit of the company declined by 33.5 per cent year on year to Rs 13.2 crore resulting in a 467-basis-point decline in the operating profit margin to 12.5 per cent. The margins declined on the back of lower absorption of fixed costs due to lower sales volume.
The interest cost declined by 47.7 per cent to Rs 0.5 crore and the depreciation charge rose by 50 per cent to Rs 1.2 crore.
Consequently, the net profits of the company declined by 39.2 per cent to Rs 7.7 crore, well below the brokerage expectations. Lower than expected operating performance led to lower-than-estimated net profits.
The current order book of the company stands at around Rs 350 crore.
The new capacity of 3,000MVA is expected to come on stream by the end of Jul-Sep 2008-09 and would start contributing to the top line from Oct-Dec 2008-09. After this capacity expansion, the company's total capacity would go up to 11,000MVA from 8,000MVA at present.
Sharekhan has revised their earnings for Bharat Bijlee mainly to account for the lower than expected revenue growth and lower operating margins going forward. The brokerage now expects the company to report compounded annual growth rate of 17.2 per cent and 14.2 per cent in its revenues and profits respectively. Subsequently their 2008-09 and 2009-10 earnings per share now stands at Rs 142.3 and Rs 167.5 per share respectively.
At the market price the stock is trading at price-earnings of 7.4x and an enterprise value /earnings before interest, depreciation, tax and amortisation of 2.4x on our FY2010 estimates.
The operating profit of the company declined by 33.5 per cent year on year to Rs 13.2 crore resulting in a 467-basis-point decline in the operating profit margin to 12.5 per cent. The margins declined on the back of lower absorption of fixed costs due to lower sales volume.
The interest cost declined by 47.7 per cent to Rs 0.5 crore and the depreciation charge rose by 50 per cent to Rs 1.2 crore.
Consequently, the net profits of the company declined by 39.2 per cent to Rs 7.7 crore, well below the brokerage expectations. Lower than expected operating performance led to lower-than-estimated net profits.
The current order book of the company stands at around Rs 350 crore.
The new capacity of 3,000MVA is expected to come on stream by the end of Jul-Sep 2008-09 and would start contributing to the top line from Oct-Dec 2008-09. After this capacity expansion, the company's total capacity would go up to 11,000MVA from 8,000MVA at present.
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Sharekhan has revised their earnings for Bharat Bijlee mainly to account for the lower than expected revenue growth and lower operating margins going forward. The brokerage now expects the company to report compounded annual growth rate of 17.2 per cent and 14.2 per cent in its revenues and profits respectively. Subsequently their 2008-09 and 2009-10 earnings per share now stands at Rs 142.3 and Rs 167.5 per share respectively.
At the market price the stock is trading at price-earnings of 7.4x and an enterprise value /earnings before interest, depreciation, tax and amortisation of 2.4x on our FY2010 estimates.
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