Religare puts buy on EMCO; target Rs 215
Religare Research has maintained ‘buy’ on Emco and revised the target price to Rs 215 from Rs 240 earlier.
By ET Online |
MUMBAI: Religare Research has maintained ���buy��� on Emco and revised the target price to Rs 215 from Rs 240 earlier. The company has posted lower-than-expected net sales growth of 19 per cent year on year to Rs 180 crore during Apr-Jun 2008-09. The subdued growth was the result of the negative growth of 10 per cent witnessed in the transformers segment.
The projects and meters divisions maintained their growth momentum, rising by 235 per cent and 199 per cent respectively. Emco's current order book stands at a healthy 1,320 crore, a rise of 32 per cent, which provides clear revenue visibility for the next two years.
The increasing share of revenues from the project division led to a dip in the overall EBITDA margin by 10 basis points from 13.1 per cent to 13 per cent during Apr-Jun 2008-09. The 11 per cent growth in net profit, to Rs 10,050 crore in the quarter, was muted due to higher depreciation and interest expenses, says Religare.
Religare has maintained estimates for 2008-09 and 2009-10 since they believe that the lower growth witnessed during Apr-Jun 2008-09 is a one time phenomenon.
Taking into account the current market scenario, the brokerage has increased their risk-free rate to 9 per cent from 8 per cent previously and cost of debt to 9.8 per cent from 9 per cent previously, while they have maintained the debt to equity ratio at 0.5.
The projects and meters divisions maintained their growth momentum, rising by 235 per cent and 199 per cent respectively. Emco's current order book stands at a healthy 1,320 crore, a rise of 32 per cent, which provides clear revenue visibility for the next two years.
The increasing share of revenues from the project division led to a dip in the overall EBITDA margin by 10 basis points from 13.1 per cent to 13 per cent during Apr-Jun 2008-09. The 11 per cent growth in net profit, to Rs 10,050 crore in the quarter, was muted due to higher depreciation and interest expenses, says Religare.
Religare has maintained estimates for 2008-09 and 2009-10 since they believe that the lower growth witnessed during Apr-Jun 2008-09 is a one time phenomenon.
Taking into account the current market scenario, the brokerage has increased their risk-free rate to 9 per cent from 8 per cent previously and cost of debt to 9.8 per cent from 9 per cent previously, while they have maintained the debt to equity ratio at 0.5.
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