Punj Lloyd : Multibagger by PN Vijay, Investment Advisor
Punj Lloyd is increasingly focusing on the high value added Hydrocarbon vertical where the margins are higher and the work is also more specialized
Current Market Price: Rs 275.30
Target Price: Rs 500
Punj Lloyd is a leading construction company with two major verticals, namely Hydrocarbon and Infrastructure. It also has an overseas subsidiary SembCorp. It is showing significant growth in both its verticals due to strong order flows in the Oil and Energy sector and in basic infrastructural sectors. During the first quarter which just ended, Punj Lloyd reported an increase in its net sales of 73%, EBITDA of 39% and a net profit growth of 126% to Rs. 59.5 crores on a consolidated basis. The quarter was marked by a robust growth in new orders in the pipeline division.
REASONS TO BUY:
1. The company is increasingly focusing on the high value added Hydrocarbon vertical where the margins are higher and the work is also more specialized. There has been an impressive improvement in the profitability of SembCorp.
2. The debt level is reduced significantly and the debt / equity ratio now stands much lower than one.
In terms of valuation it is trading around 22 times its expected EPS to Rs. 12 for 2007-08. This is an almost 100% improvement on the EPS just concluded financial year.
CONCERNS:
1. A possible reduction in order flows in Hydrocarbons.
2. Delay in execution leading to under achievement of profit targets.
These concerns are endemic to the entire sector and we believe that Punj Lloyd has very good expertise in project implementation.
Disclaimer:
Punj Lloyd shares are a part of our proprietary portfolios and also in many of the portfolios managed by us.
Punj Lloyd is increasingly focusing on the high value added Hydrocarbon vertical where the margins are higher and the work is also more specialized
Current Market Price: Rs 275.30
Target Price: Rs 500
Punj Lloyd is a leading construction company with two major verticals, namely Hydrocarbon and Infrastructure. It also has an overseas subsidiary SembCorp. It is showing significant growth in both its verticals due to strong order flows in the Oil and Energy sector and in basic infrastructural sectors. During the first quarter which just ended, Punj Lloyd reported an increase in its net sales of 73%, EBITDA of 39% and a net profit growth of 126% to Rs. 59.5 crores on a consolidated basis. The quarter was marked by a robust growth in new orders in the pipeline division.
REASONS TO BUY:
1. The company is increasingly focusing on the high value added Hydrocarbon vertical where the margins are higher and the work is also more specialized. There has been an impressive improvement in the profitability of SembCorp.
2. The debt level is reduced significantly and the debt / equity ratio now stands much lower than one.
In terms of valuation it is trading around 22 times its expected EPS to Rs. 12 for 2007-08. This is an almost 100% improvement on the EPS just concluded financial year.
CONCERNS:
1. A possible reduction in order flows in Hydrocarbons.
2. Delay in execution leading to under achievement of profit targets.
These concerns are endemic to the entire sector and we believe that Punj Lloyd has very good expertise in project implementation.
Disclaimer:
Punj Lloyd shares are a part of our proprietary portfolios and also in many of the portfolios managed by us.
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