Incorporated in 1985 as a joint venture between GEA Energietechnik GmbH, Germany and B.G. Raghupathy, company has now emerged as a key player in the Balance of Plant (BoP) and EPC space.
BGR energy has now expanded its presence in providing entire gamut of services for the power plant commissioning.
Apart from having expertise in executing power projects, it has also diversified its presence across captive power projects, oil and gas equipment, air fin coolers, environmental engineering, electrical projects and infrastructure projects.
With the capacity expansion at the existing locations as well as commissioning of new facilities, company is set to cater to a wider base of clients.
We believe that, with an order book of Rs110 billion and with significant expertise in the above segments, company is set to emerge as a leading player in the BOP and EPC segment with huge investments planned by state and central governments in power, oil and gas, electrical and infrastructure.
We thus expect revenues to grow at a CAGR of 49% and net profits to grow at a CAGR of 37% between FY08-FY10.
At current price of Rs.255, stock is trading at very attractive valuations of 15.2x and 11x on P/E multiples and 7.9x and 6.5x on EV/EBITDA estimates for FY09 and FY10 respectively.
We recommend BUY with a price target of Rs349 based on the DCF valuation methodology on FY10 estimates using a WACC of 13% and terminal growth rate of 5%.