Punj Lloyd Ltd (PLL) has won an order to engineer, procure, install and commission a 211km pipeline with associated stations and infrastructure in Qatar.
The contract is valued at Rs3,636 crore ($800 million). This is the fourth engineering, procurement and construction order bagged by the company in Qatar alone.
The Middle-East has been one of the key business markets for the company and 27% of its current order backlog constitutes of orders from this region.
We believe the investments planned in the Gulf Cooperation Council (GCC) countries over 2006-12 spell a great opportunity for PLL.
The company’s increased foothold in these geographies will further enhance the company’s capability to win larger and more important projects in the GCC nations.
Outlook and valuation
PLL continues to display its ability to bag larger orders, which would eventually increase its average order size, one of our key investment arguments on the stock.
The current order backlog of Rs24,063 crore, which is 3.1x its FY2008 earnings, imparts ample visibility to the company’s future revenues.
At the current market price, the stock is trading at 16.6x and 12.6x FY2009E and FY2010E fully diluted earning per share respectively.
We believe the stock is attractively valued at these levels given that the company’s earnings are estimated to grow at a compounded annual growth rate of 51.2% over FY08-10E.
We maintain our BUY recommendation on the stock with a 12-18 month price target of Rs532.