We spoke to the management of SREI Infrastructure finance to discuss their business growth outlook and clarification on the enquiry by Ministry of Corporate Affairs to sought explanation on various charges.
We continue to maintain a positive outlook for SREI’s business growth. However, in the backdrop of unfavorable macroeconomic scenario and a slower growth in FY10, we expect slower earnings growth in SREI’s profitability during FY10.
We have tweaked our earning estimates for the company to Rs1,433.6 million from Rs1,544 million (-7.7%) for FY09 and Rs1,976.27 million from Rs2,207 million (-7.2%). We expect an EPS of Rs10.7 in FY09 and Rs14.7 in FY10.
Given the unfavorable market conditions, we are assigning a higher holding company discount (40%) to SREI’s equity investments in various projects (which include roads, ports and SEZs).
Given the continuing strong trend in the disbursement book, we maintain our BUY on SREI Infrastructure, with a revised price target of Rs140. (earlier Rs190)