Kamlesh Kotak, Vice President Research, Asian Markets Securities said, BGR Energy was doing phenomenally well because of that captive equipments manufacturing, 50% of the products were manufactured in house. He said, BGR Energy was enjoying around 6% of PAT margins. “We have a target of Rs 450 on BGR Energy.”

Kotak added, Sadbhav Engineering’s EPC business had got a good order book of around Rs 4000 crore plus against the revenue of FY09 of Rs 1000 crore. “We have a price target on Sadbhav Engineering at around Rs 900.” He further said, Sadbhav Engineering is going to be a good stock at the current rate.

Here is a verbatim transcript of the exclusive interview with Kamlesh Kotak on CNBC-TV18. Also watch the accompanying video.

Q: What is your target price for BGR Energy? How much uptick do you expect from here and then give us three four key triggers why the stock should go there?

A: As this is the leading company in the balance of plant that is catering to power sector, that is Engineering Procurement Construction (EPC) and construction of plants. The company has got four times the revenue order book backlog. The opportunity for the BOP if you go from the 11th and 12th plan perspective is something triggering up Rs 170,000 crore and the company has already scowed 8-10% of the market share for its own business out of it. The company is doing phenomenally well because of that captive equipments manufacturing, 50% of the products are manufactured in house. The company is enjoying around 6% of PAT margins. We have the EPS target on the stock at around Rs 22 and Rs 28 over FY10 and FY11, with 30% CAGR over the next 3-5 years and 15 times we have a target of Rs 450 on the stock compared to the current level of around Rs 360-370 odd.

Q: What you have to say about Sadbhav Engineering- what is the price target?

A: Sadbhav is a niche construction company. It has got presence across roads, mining and irrigation. The company is already having six BOT projects of which two already have been operational and started generating cash revenues. The company’s EPC business also has got a good order book of around Rs 4000 crore plus against the revenue of FY09 of Rs 1000 crore. It is also big for mega tenders in mining and irrigation business. The company is already having two more ambitious BOT projects which have yet to factor in the pricing. The current price is just around the core business of EPC, BOT valuation yet to catch in. We have a price target on the stock at around Rs 900. Well in the stock 8 times on the core business front and BOT projects around 320. So it is going to be a good stock at the current rate. The company already filed papers for a rights issue which is coming in the near term, so investor can also benefit from that because the right issue will be discount of 10-15% on the current market price. So it is a good construction play with infrastructure in focus.

Q: Do you own the stock?

A: No I do not own any of the stock but we have recommended to our clients and associates.

source: Moneycontrol

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