Buy Patel Engineering; target of Rs 80: ICICI Direct

ICICI Direct's research report on Patel Engineering

Patel engineering is an EPC player which specialises in technologyintensive areas like hydro, tunnelling, irrigation, water supply, urban infrastructure, and transport. The company enjoys an order book of ₹ 19,134 crores (Including L1 Orders) as of Q3FY24, implying 4.3x book to bill. Strong Presence in segment like Hydro Power, Irrigation which has big opportunity: Hydro power, tunnelling and irrigation segment constitute ~93% of the Company’s Orderbook. The company foresees a strong ordering opportunity ahead in the above-mentioned segments such as a) 19 GW of HEP projects concurred by CEA b) State-run hydropower major pursuing pumped storage projects (PSPs) of more than 20,000 megawatts (MW) capacity across states c) huge pipeline of 875 tunnels, spanning a length of around 2,600 km. and d) Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) for 2021-26 outlay allocation of ₹ 93,068 crore.

Outlook

Given the strong opportunity from the key segment driving the topline and earnings growth visibility coupled with stable balance sheet, we initiate coverage with a BUY rating on the stock. We assign a target price of ₹ 80, thereby valuing it at 16x FY26 P/E.

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Patel Engineering - 23042024 - icici