Hold Sadbhav Engineering, target Rs 412: Anand Rathi

Anand Rathi has a hold call on Sadbhav Engineering Ltd. with a target price of Rs 412. The current market price of Sadbhav Engineering Ltd. is Rs 326.45 Time period given by the brokerage is a year when Sadbhav Engineering Ltd. price can reach defined target.
Sadbhav Engineering Ltd., incorporated in 1988, is a midcap company with a market cap of Rs 5449.09 crore.


Investment rationale by Anand Rathi

Though it could not meet its entire FY18 de-leveraging guidance, lower debt y/y signals good prospects for Sadbhav Engineering. The company guides to further de-leveraging (aided by recovery of dues for the recently-completed projects), though any significant reduction seems contingent upon recovery of loans and advances from Sadbhav Infrastructure (efforts underway). On the operations side, revenues could have been better had the receipt of the appointed date not been delayed, but expanded margins made up for the slightly lower-than-guided-to FY18 revenues. Ahead, financials are expected to be better as a number of recently-secured projects are taken up for execution (mostly expected by Q3/Q4) and as management is optimistic of adding more to its revenue assurance. Though operations hold out promises, the potential seems limited. Consequently, we retain our Hold recommendation.