Buy Punj Lloyd for target Rs 532: Sharekhan

Sharekhan has maintained ‘buy’ rating on Punj Lloyd for an 18-month target price of Rs 532. Punj Lloyd’s performance during Apr-Jun 2008-09 was well above the brokerage and street's expectations due to a robust revenue growth led by strong execution of projects.

The stand-alone entity reported a 120.9 per cent growth in the revenues to Rs 1,558.58 crore. The operating profit margin declined by 20 basis points to 10.1 per cent and the net profit grew by 237.2 per cent to Rs 71.5 crore.

On consolidated basis, the company reported 89.9 per cent growth in the revenues to Rs 2,648.8 crore, while the operating profit margin improved by 110 basis points to 9.8 on the back of lower raw material costs. The company has provided for Rs 48 crore on mark-to-market basis on its foreign exchange losses. Adjusting for the same, the adjusted net profit grew by 119.1 per cent to Rs 130.3 crore. The reported net profit was up 88 per cent to Rs 111.9 crore.

At the end of 2007-08, the auditors had made a qualification on the project that could potentially incur a loss of Rs 305.3 crore. The auditors have now reduced the aforesaid amount to Rs 194.8 crore and the management continues to believe it will achieve a break even on the project, says Sharekhan.

As Punj Lloyd booked orders worth Rs 2,640 crore during the quarter, the consolidated order book now stands at Rs 20,162 crore (2.6x FY2008 revenues), imparting strong visibility to the revenues going forward.

At the market price, Punj Lloyd is trading at 11.7x FY2010E earnings.