McNally Bharat –Buy- Angel Securities
McNally Bharat (MBE) declared its FY2010 consolidated results. Total sales stood at Rs1,806 crore, 11% below our estimate of Rs2,019cr. EBITDA margins came in line with our estimate of 8%.
Total PAT for the year came in at Rs61cr as against our estimate of Rs75 crore (18% lower) mainly on account of lower sales, higher interest and depreciation outflow. We believe that an improving economic scenario (indicated by a revival in the IIP), the continuous government focus on infrastructure spend and pick-up in private capex augurs well for the companies providing EPC solutions to the core sectors of the economy.
The overall emerging opportunities for MBE are expected to be around Rs51,600 crore over FY2010-15E. Over the longer term, the port and steel sectors are likely to offer the highest opportunity of Rs22,200 crore, while the power and mining sectors are likely to be the key growth drivers in the near term.
The government’s strong focus on the power sector through "Power for all by 2012", is expected to result in an expansion of generation capacity in the sector, leading to higher opportunities for the BoP players.
MBE has robust order book of Rs4,803cr (2.6x FY2010E consolidated revenues) led by the power sector, which lends high revenue visibility. Going ahead, over FY2010-12E, we estimate the company to register a CAGR of 36% in sales and profit, respectively. At Rs286, the stock is available at attractive valuations of 10x FY2012E earnings and 5x FY2012E EV/EBITDA. We maintain a BUY on the stock, with a target price of Rs406.
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