STOCK RECOMMENDATIONS
By Anand Rathi Institutional Research
1) Sanghvi Movers (CMP: 280; Target Price: 489)
* With healthy utilisation levels of 82 per cent, revenue and profit after tax (PAT) are expected to grow at 15 per cent and 18 per cent, respectively, between 20015/16 and 2017/18. * With contribution of the wind power business rising from 36 per cent in 2013/14 to 61 per cent now, the company has planned a capex of Rs 1,300 crore. With orders fully booked, we expect good growth going forward. * Attractive valuation of nine times 2016/17 earnings per share (EPS) of Rs 31 and seven tines 2017/18 EPS of Rs 37.6
2) KEI Industries (CMP:118; Target Price: 135)
* With aggressive brand building, strong volume growth, ongoing capacity expansion and strong order book, the company is likely to register 16 per cent revenue growth and 45 per cent PAT growth between 2015/16 and 2017/18. * Has received orders in EPC (engineering, procurement and construction) space from various utilities; the ongoing expansion at its Chopanki plant is expected to be operational by November 2016 * Plan to repay debt and low planned capex are likely to help it improve the debt-equity ratio. It is trading at a price to earnings (PE) ratio of 8.2 times 2017/18 earnings
3) KNR CONSTRUCTION (CMP 586; Target Price 772)
* Execution picking up pace. The order book on March 31 was Rs 3,400 crore (3.9 times trailing 12 months revenues). It has submitted bids for projects worth Rs 600 crore likely to be awarded in the next two months. * It posted 15 per cent revenue growth in the 4th quarter of 2015/16 due to better execution. The EBITDA margin came at 14.8 per cent (13.8 per cent a year ago). Revenues expected to grow at 30 per cent a year between 2015/16 and 2017/18 with margins of around 15 per cent. * On the back of strong operating performance, adjusted PAT rose 39 per cent in the fourth quarter. * Its conservative tax-accounting policy played out in 2015/16, with total tax reversal of Rs 41.1 crore generating a high degree of profitability. The current order book is eligible for Sec.80-IA benefits; the company will continue to avail of such tax benefits till 2017/18.
4) Ahluwalia Contracts India Ltd (CMP 292; Target Price 360)
* The company is aiming at fresh orders of Rs 2,000 crore in the current financial year. Its current order book is 3.6 times trailing 12 months revenues. It is seeing less competitive intensity and huge order inflows from re-development projects in the NCR. * Revenue rose 22.1 per cent year-on-year in the fourth quarter of 2016/17 and 17.9 per cent in 2015/16. The management is expecting a significant pick-up in execution in 2016/17 and 2025 per cent revenue growth in the next two years backed by orders from the public sector. * The EBITDA margin rose 490 basis points in the fourth quarter to 13.9 per cent. EBITDA margins likely to be above 13 per cent over the next two years. Net margin in the fourth quarter came in at 6.9 per cent (highest since 2006/07). * Revenue expected to grow at 28 per cent and PAT at 37 per cent between 2016/17 and 2017/18, bolstered by strong order book and improved execution.
5) Ashok Leyland (CMP: 91.60 Target price: 124)
* The commercial vehicle industry is expected to continue its strong run in 2016/17. * With revival of the rural economy, the light commercial vehicle segment should also do well . * 15 per cent volume growth expected. With stable margins, earnings growth is likely to be good. * Trading at 16 times 2017/18 earnings.
CMP is current market price; CMP and Target Price in Rs