Saturday, November 8, 2008

Genus Power Infrastructures - Good Power and Infrastructure stock

Genus Power Infrastructures
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs275
Current market price: Rs110

Price target revised to Rs275

Result highlights

The Q2FY2009 results of Genus Power Infrastructures Ltd (GPIL) were a mixed bag. While the revenue growth was lower than our estimate, the profit was above our expectation due to a better-than-expected operating performance and a higher other income.
The net income from operations grew by 18.6% to Rs119.5 crore as against our estimate of Rs127.9 crore. The revenue growth was slower during the quarter due to slower-than-expected execution of project orders. The sales are expected to pick up in Q3FY2009 on the back of faster execution by the company.
The operating profit of the company was up by 29.9% to Rs22.2 crore resulting in the operating profit margin (OPM) of 18.6% during the quarter. The OPM improved by 162 basis points on a year-on-year (y-o-y) basis mainly due to a decline in the raw material cost as a percentage of sales.
The other income rose by 82.4% to Rs1.8 crore on account of interest accrual on deposits by the company.
The interest cost went up sharply by 52.3%, as the company has Rs200 crore of debt on books. The deprecation charge rose by 11.6% to Rs1.5 crore. Consequently, the net profit of the company rose by 27.5% to Rs11.7 crore, ahead of our estimate of Rs10.4 crore.
The company has an order book of Rs721 crore during Q2FY2009 as against Rs645 crore at the end of Q1FY2009. The company stands “L-1” bidder in works worth Rs1,405 crore.
We are revising our estimates for the company mainly to reflect a lower revenue growth and a higher interest cost. Consequently we have lowered our profit estimate for FY2009 by 7.1% and that for for FY2010 by 7.5%.
At the current market price the stock is attractively priced at 2.6x FY2009 fully diluted earnings per share (FDEPS). With a book to bill ratio of 1.5x we believe the current price of the stock does not capture a compounded annual growth rate (CAGR) of 36.9% in the profits over FY2008-10E. We remain positive on the prospects pf the company and recommend a Buy on the stock with a revised price target of Rs275 per share (5x FY2010 FDEPS).

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