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Kotak puts ACCUMULATE on Punj Lloyd

Kotak puts ACCUMULATE on Punj Lloyd
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First Published: Wed, Jan 28 2009. 10 26 AM IST

Updated: Wed, Jan 28 2009. 10 26 AM IST
Revenues of Punj Lloyd registered an increase of 47% and 44% on consolidated and standalone basis respectively on a year-on-year basis. This was better than our expectation of Rs29.9 billion on consolidated basis for Q3FY09.
With write off to the tune of Rs2,072 million on account of SABIC order and Rs729 million on account of forex losses, company has shown an operating loss on a consolidated basis. However on a standalone basis, operating margins stood at 12.8%.
On a consolidated basis, company reported a loss of Rs2,255 million while net profits grew by 128% on a standalone basis led by healthy revenue growth and improvement in operating margins.
Outlook and valuation
We modify our estimates to factor in write offs as well as cost overruns in certain projects.
Thus, with an order book of Rs219 billion, we expect company’s revenues to grow at a CAGR of 30% between FY08-FY10 and profits to grow at a CAGR of 22% between FY08-FY10.
At current price of Rs 92, stock is trading at very attractive valuations of 5.2x its P/E multiples and 4.3x its EV/EBITDA multiples on FY10 estimates respectively.
Though stock is currently trading at very attractive valuations but we believe that near terms issues related to decision of court proceedings against SABIC Petrochemicals, cost overruns in Heera redevelopment project are expected to impact the performance of company in near future.
Delays in four other projects may also have an adverse impact on future financial performance of the company.
Under these uncertainties, we recommend an ACCUMULATE on the stock with a revised price target of Rs 189 as against Rs 265 earlier, till the time these issues are resolved.
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First Published: Wed, Jan 28 2009. 10 26 AM IST
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