Sharekhan is bullish on Sadbhav Engineering has recommended buy rating on the stock with a target price of Rs 300 in its research report dated March 26, 2019.
Sharekhan's research report on Sadbhav Engineering
Sadbhav Engineering Limited (SEL) is said to be in advanced stages of offloading its operational road assets held by Sadbhav Infrastructure Projects Limited (SIPL). The deal is likely to significantly deleverage its consolidated balance sheet, aid in recovery of its outstanding dues towards SIPL and help in financing equity requirement of under-construction projects. SEL’s ~61% of current order book of Rs. 12,872 crore (3.5x TTM revenue) is expected to commence construction from December 2018 to June 2019. Consequently, SEL expects to post at least 20% y-o-y growth in FY2020 revenue versus single-digit growth over the trailing four years. The road sector shows rising gross bank credit deployment, a key positive trigger for the sector, which was grappling with land-acquisition issues and higher upfront equity requirement from developers in the recent past. We have introduced FY2021 earnings estimate in this note.
Outlook
We maintain our Buy rating on SEL with a revised SOTP-based price target of Rs. 300 on account of rolling forward our valuation multiple to FY2021.
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