Punj Lloyd group has posted a healthy 38% Y-o-Y growth in net sales for Q4FY08, with full fiscal sales increasing by 51%. Higher revenues were fuelled by increased order booking across verticals.
The results were marred, however, by the auditor’s qualification regarding losses of Rs3.1 billion expected on a contract being executed by Simon Carves, which was not accounted for during the quarter. Management has stated that the cost escalation on this project would be negotiated with the client, leading to project breakeven (on which we have based our estimates).
The group’s order backlog currently stands at Rs196 billion (2.5x FY08 sales), including SEC’s share of Rs68.5 billion. Consolidated EBITDA margins improved slightly to 10.6% and 8.3% for Q4FY08 and FY08 respectively, while PAT rose 32% Y-o-Y during the quarter to Rs1.2 billion and 63% for the year to Rs3.6 billion.
We have marginally revised our estimates for FY09 and FY10, leading to a decline in our PAT figures by 7% and 10% respectively. We have also switched from a P/E-based valuation to the DCF approach as we believe the latter presents a more accurate picture of the company’s future growth prospects.
Our DCF-based valuation gives us a fair value of Rs364 for the core business, while the Pipavav Shipyard stake value remains unchanged at Rs47. We have arrived at a price target of Rs411 from Rs569 previously and maintain a BUY on the counter.