Saturday, September 1, 2007

KJMC maintains buy on Prajay Engineers

PESL is one of the leading companies in construction sector in Hyderabad with over 20 years of experience and has demonstrated consistency in performance, quality infrastructure facilities, and innovative designs along with timely execution of each project. Till date, the company has developed and delivered approx. 4.5 million sf ft of built up area.

Order Book

The company has 35 projects under construction, comprising of 18 million sq ft of area. These projects include high end residential apartments and townships, 3 5-star hotels, 3 business class hotels, 1 golf course and several retail and entertainment complexes. Government thrust on infrastructure spending has given a tremendous boost to construction sector in terms of market size resulting in higher demand across the sector.

It is expected that
investments to the tune of USD 320 billion will be required to boost Infrastructure in India over the next few years. During FY07, PESL reported a tremendous 187% yoy growth in topline to Rs 210 crs against Rs 73 crs in FY06. During the same period, its bottomline zoomed by 240% to Rs 77.2 crs from Rs 22.7 crs in FY06. During Q1 FY08, the topline registered YoY growth of 89% to Rs 70 crs from Rs 37 crs in Q1 FY07 whereas the bottomline zoomed by 104% to Rs 27 crs from Rs 13 crs. PESL's operating margins improved by 474 bps to 47.22% whereas net profit margin improved by 571 bps to 37% during FY07. During Q1 FY08, PESL's operating margins improved YoY by 1232 bps to 54% whereas net profit margins improved by 290 bps to 39% during the same period.

Valuations

At CMP of Rs 309, the
stock is trading at a P/E of 8.67x on FY07 adjusted EPS. Considering the growth momentum, decent financial performance and future plans, we believe that PESL will generate decent returns for the shareholders riding on higher growth trajectory.

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