Company Review: BL Kashyap

The operating profit margin (OPM) improved by 25 basis points to 11.9% during the quarter. Consequently, the company’s operating profit grew by 39.8% y-o-y to Rs49.2 crore.

During the quarter the company liquidated fixed maturity plans worth Rs85 crore and generated a profit of Rs7.3 crore, which led to higher other income of Rs10.3 crore during the quarter. Consequently the net income grew by 30.4% y-o-y to Rs36.2 crore in line with our expectation of Rs35.3 crore.

For BPTP order aggregating to Rs1,040 crore, construction work has been delayed as approvals from the local authority is pending and BLK now expects the construction to start in December 2008.

For FY09, the company now expects the revenues to be in the range of Rs2,100-2,300 crore (this factors in Rs100 crore from construction of Soul Space Projects and only Rs40-50 crore from BPTP order).

The company witnessed order inflow of Rs415 crore in Q1FY09 and its current order book now stands at Rs3,070 crore. It expects the order book to reach Rs3,500 crore by the end of August 2008.

We have revised our FY09 earnings estimate downward by 4.5% due to delay in BPTP project execution.

We now expect the company’s top line and bottom line to grow at a compounded annual growth rate (CAGR) of 40.3% and 35.4% respectively during the period FY2008-2010 on the back of a healthy order book.

At the current market price the stock is trading at 12.6x FY09 earning estimates and 8.9x FY10 earning estimates after adjusting for the valuation of Soul Space Projects. We maintain our BUY recommendation on the stock with price target of Rs1,356.

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