Q2 FY08 Result Preview
Sector summary:
We expect the sector to continue to post a good set of numbers given the
strong macro drivers like spending on the formation and strengthening of the
national grid. Distribution reforms continue to be firmly in place. The quarter
saw consolidation with the announced merger of RPG Transmission with KEC
International. With telecom sector also in a capex mode many of the
companies in the transmission tower sector are looking to ramp up their
revenues form the telecom tower space.
Key highlights of the results:
. The net sales for the sector is expected to grow by 23% YoY driven by
volume growth
. EBIDTA for the sector is expected to grow at 30% YoY on account of
better margins YoY .
. PAT is expected to grow at 29% YoY.
. We expect a slight slow down in order book given the fact that not many
order were awarder by PCGIL in the quarter.
Our top picks are:
. Jyoti Structures
. KEC International.
Current Price: Rs572 Target price: Rs714
KEC currently trades 16x and 13.3x FY08E and FY09E earnings respectively. A
strong order book of Rs32.5bn (1.5xTTM sales) and stable outlook for margins
provides strong earning visibility. We maintain our Buy recommendation on
the stock.
Report attached
