Sunil Hitech Engineers

As investments in the power sector is gathering pace, there is dearth of companies who can provide engineering services required to build the power plants. Sunil Hitech, which is in the fabrication, erection and commissioning work, has been a key beneficiary of this demand. No wonder, the company currently has an order book of Rs 2,062 crore, which is 3.5 times its 2008-09 revenues and provide visibility for the next two years. As a result of its efforts to move up the engineering value chain, the company has bagged balance of plant (BOP) power projects from Mahagenco and L&T. The advantage of this move is that the company not only qualifies for BOP contracts of up to 250 MW, it can also eye for large size projects in this segment and garner higher revenues. Sunil Hitech’s stock is currently trading at a PE multiple of 8 times which is attractive for acompany, which is operating in a growing industry and is expected to report strong growth in earnings over the next two years. Historically, the company’s stock has been trading in the range of 10-22 multiples, which is higher as compared to its current PE. The gains from an investment in this stock could come from growth in earnings as well as a possible rerating.
With inputs from Sarath Chelluri the company is now moving into other states on the back of its increased scale and bidding capacity. The stock is trading at Rs 187, which discounts its 2010-11 estimated earnings by 5.5 times. The valuations are reasonable for a company which is operating in a fast growing industry. Strong order book, high revenue growth, good margins, robust return ratios, regular dividends and low debt-equity are among key factors that make agood case for investment in this company.