Moneycontrol Bureau
Shares of Sadbhav Engineering (SEL) climbed as much as 4 percent intraday Tuesday after Kotak Institutional Equities raised target price on the stock to Rs 275 from Rs 230 earlier.
According to the brokerage house, the stock looks attractive as the company's roads portfolio offers a long runway for growth with protection against surprises in traffic and cash flows.
"SEL has a durable roads portfolio, benefiting from long residual life, normalized traffic risk, and well-spread and back-ended debt-repayment schedule (protects on cash flows against business volatility). Stricter norms on overloading can boost toll collections. However, the early stage of portfolio will keep the business in investment mode for another 2-3 years," Kotak explained.
According to the report, the construction business will benefit from improving execution and margin trajectory that would be supported by falling bitumen prices, an improving mix (higher share of mining) and operating leverage.
Key risks for SEL are large and uncertain contribution from the Maharashtra border check-post, potential impact of recent non-compliance of some subsidiaries with debt covenants and roads BOT opportunity in NHDP to last till FY2017.
At 10:59 hours IST, the stock was quoting at Rs 254.35, up Rs 8.10, or 3.29 percent on the BSE.
Posted by Sunil Shankar Matkar
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