Karvy on Patel Engineering - Target Rs 529:
Karvy Stock Broking is bullish on Patel Engineering and has recommended buy rating on the stock with a target of Rs 529, in its research report.
"Patel Engineering (PEL)'s Q4FY10 result was below our expectation at operational level due to higher cost recognition against actual revenue booking. During the quarter the company has reported net sales growth of 24.1% to Rs. 11.97bn in Q4FY10 (against our expectation of Rs 10.68bn) from Rs. 9.65bn in Q4FY09. Though the company has largely maintained its EBITDA margins in the range of 16%-18%, since last 6 quarters, this quarter is there has been a dent of 280bps in its EBITDA margin to 12.6%. We have introduced our earning estimates for FY12 and expect revenue growth of 26% to Rs 45bn based on robust order book position and EPS of Rs 45. PEL is currently trading at PER multiple of 9.3x, EV/ EBIDTA multiple of 6.7x on FY12 earnings."
"We have valued the core business of the company using EV/EBITDA methodology at its historical average multiple of 6x. The company is developing real estate property in Bangalore (prevailing rate of Rs 2500/sq. ft) and Noida (prevailing rate of Rs 3500/sq. ft) which has got a good response. We believe going ahead real estate would speed up the development process of projects and start contributing to bottom-line from FY12 onwards. Real estate division valued at significant discount to NPV and value of raw land. The company's first phase power venture has cleared the preliminary stage and would attain the financial closure in H2FY11. However we have not assigned any value to power projects. We maintain our BUY rating with price target of Rs 529 based on our SOTP valuation."
Karvy on Tulip Telecom - Target Rs 1175
Karvy Stock Broking is bullish on Tulip Telecom and has recommended buy rating on the stock with a target of Rs 1175, in its research report.
"Tulip Telecom is an enterprise data communications provider with a focus on the Multi-Protocol Label Switching Virtual Private Network business (MPLS VPN). We believe the steep correction in the company's stock price and concerns over heightening competition post the Broadband Wireless Access (BWA) spectrum auctions in the enterprise data services market where Tulip operates are overdone and believe the company has a strong incumbent position, a vast last-mile network that will take time for competitors to match and is taking initiatives to expand this business on its last mile fibre network, which will further strengthen its incumbency position. We also believe most of the operator roll outs post the BWA auction will be on the consumer side and not on the enterprise side."
"The company's initiatives to expand its suite of services into managed services and value-added services will drive future growth. We forecast revenue and net profit CAGRs of 26% and 21%, respectively over FY10-12E. At the CMP, the stock trades at a P/E of 7.7x FY12E EPS. We Initiate Coverage on the stock with a 'Buy' recommendation and 12-month target price of Rs 1,175, implying a P/E of 10x FY12E EPS," says Karvy Stock Broking research report.
