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.

Stock views on Neyveli Lignite Corporation, Dwarikesh Sugar, Lanco Infratech

Indiabulls Sec on Neyveli Lignite- Target Rs 100
Indiabulls Securities Research has maintained its buy rating on Neyveli Lignite Corporation with a target price of Rs 100 in its research report.

"Neyveli Lignite Corporation Ltd. (NLC) posted a 9.7% yoy increase in the net profit in Q3’09. This was partially driven by the finalisation of the FY04–09 power tariffs for TPS-I, resulting in an additional revenue of Rs 1.7 billion during the quarter. We maintain our target price of Rs 100, based on our DCF valuation. Since our target price implies a 38% potential upside from the CMP, we maintain our Buy rating," says Indiabulls Securities' research report

LKP Shares on Dwarikesh Sugar - Target Rs 75

LKP Shares has recommended a buy rating on Dwarikesh Sugar Industries with a price target of Rs 75 in its research report.

"DSIL is a fully integrated sugar complex with a capacity of 21,500 TCD in sugar at its three manufacturing facilities located at Dwarikesh Nagar-DN at Bijnor, Dwarikesh Puram-DP at Bijnor and Dwarikesh Dham-DD at Bareilly. The DD unit commenced production last fiscal and the steep fall in sugar prices last fiscal coincided with DSIL execution of the ultra modern DD plant along with the incremental power capacity and the combined effect led to a loss of Rs 250 million last fiscal."

"The Rs 6 billion debt on its books created substantial financial strain as the revenue side had not begun reflecting while the cost side reflected itself fully. Q1-FY’09 has witnessed a smart profitability from the co-generation unit with EBIT of Rs 150 million and the sugar operations have also turned positive with EBIT of Rs 54 million. BUY, with a one-year price target of Rs 75," says LKP Shares' research report.

Angel Broking on Lanco Infratech - Target Rs 279

Angel Broking has maintained its buy rating on Lanco Infratech with a target price of Rs 279 in its research report.

"Lanco Infratech (Lanco) has emerged as the lowest bidder for the 1,600MW Dhopave coastal power plant located in the Ratnagiri district of Maharashtra. The bidding process for the power plant started in November 2006 and a shortlist of six major private power players was released in August 2007. Lanco expects to get the letter of intent (LOI) soon after which it will take over the land and a special purpose vehicle (SPV) will be formed for the project. The company has planned to approach domestic banks for funding and aims to have Debt/Equity ratio at 70:30."

"Total cost of setting up the power plant will be approximately Rs 8,500 crore and will include construction of a jetty for imported coal, which is expected to cost Rs 500 crore. Although the project is required to be completed within 54 months, the company hopes to complete the project within 48 months from zero date, ahead of the target date. Lanco will develop the project on build, own and operate (BOO) basis and the state generation company, MahaGenco will purchase the power for the procurer, Mahavitaran, the power distribution arm of the Maharashtra government. We maintain a Buy on Lanco, with a target price of Rs 279," says Angel Broking's research report.