Ambit initiates Punj Llyod with “BUY”; target of Rs 110

MUMBAI: Ambit Capital has initiated coverage on Punj Llyod Ltd with a “BUY” rating and a SOTP target of Rs 110 (valued Punj Llyod at Rs 98 based on 8xFY10E earnings, Pipavav Shipyard at Rs 12 (book value), Punj Llyod currently trades at 5.7x FY10E earnings).

Ambit cites attractive valuation–45% discount to Larsen & Toubro’s P/E against historical discount of 30%; limited downside (10%): L&T’s historical trading pattern gives a lowest P/E of 6.4x, a 20% discount to this gives a stress case valuation of Rs 63 for Punj Lloyd—for its recommendation.

Current account surplus (for 2008) regions, Qatar (18%), Libya (48%), and Abu Dhabi, contributed about 55% to Punj Lloyd’s new order inflows for 9MFY09. These orders are largely government backed. Moreover, these economies have reiterated continued investments in infrastructure amidst a slowdown, the brokerage says in its report.

Contax, the energy industry analysts, expects capital expenditure for energy projects to go up from $60 billion in 2008 to $70 billion in 2009. This, along with sovereign stimulus and tapping of oil profits invested in SWFs, augurs well for Punj Lloyd. The company is the lowest bidder for the $0.5 billion contract currently under negotiation.

Audit qualification on account of project cost overruns of Rs 2,070 million in SABIC UK has been removed, post write-offs, in Q3FY09 P&L. Moreover, the company has also provided for all cost overruns in current projects, Ambit says.

source: Economictimes

Tags: calls, daytrading, free calls, intraday, tips

Similar Posts:

• Buy Punj Lloyd – Book profits at 235
• Buy HDIL; target of Rs 365: PINC Research
• Buy FAG Bearing; target of Rs 350: Angel Broking
• Buy Madhucon Projects, target of Rs 246: Angel Broking
• Buy IVRCL Infrastructure, target of Rs 154: Motilal Oswal