Revenues for the current quarter and full year FY08 registered a 27% and 21% y-o-y growth, inline with our expectations.
Operation margins of 16.5% and 15.6% for Q4FY08 and full year FY08 are better than expected. The company increased the proportion of order book towards higher margin hydro power projects. This has resulted in improving the operating margins significantly.
Net profit growth for Q4FY08 and FY08 stood at 58% and 36% respectively. However, Patel Engineering is still availing benefits under Section 80 IA. Tax rate for the full year FY08 is significantly below our expectations.
With a robust order book of Rs60 billion, we expect revenues to grow at a CAGR of 20% between FY08-FY10.
At current price of Rs362, stock is trading at 14.6x and 16.9x its FY08 and FY09 earnings estimates respectively. We maintain our estimates as well as rating for the stock. We recommend BUY with a price target of Rs727 on FY09 estimates.