For the year ended March 2008, the consolidated net sales of the Punj Lloyd Group stood at Rs77,529 million, up 51% y-o-y. International operations contributed 59% to the total income as against 68% in the previous year.
The EBIDTA margin was 9.31%, and normalised PAT for the year surged 69% y-o-y to Rs3,324 million. Normalised EPS (diluted) increased from Rs7 to Rs10.95 in FY08.
Going forward, we expect sales to go up by 19% in FY09 to Rs90,142 million and to grow at a CAGR of 20% through 2012. The EBITDA margins are expected to trend upwards as the low-margin legacy orders, which constitute about 3.6% of the order backlog, will run off by January 2009.
Moreover, 90% of its current orders have pass-through clauses, which should shield the margins from cost-push pressures. While in the near term, we expect a marginal improvement in the EBITDA margins, in the medium-term they should average around 10% through 2012 (relative to its current margins of 9.31%).
On the basis of DCF valuation, our fair value estimate is Rs318 (WACC 13.87%, terminal growth 5.5%). This implies a potential upside of 41% over the current price. We maintain BUY rating on the stock.