Kotak maintains negative stance on Hindustan Dorr-Oliver Ltd

Hindustan Dorr-Oliver Ltd (HDO) reported disappointing numbers for the fifth quarter. Numbers are not comparable as the company has transferred the manufacturing division to its subsidiary HDO Technologies. Nevertheless, this does not hide the sorry state of affairs in the company's operations with the company having to incur cost-overruns in most large projects.

- We have been negative on the stock since past two quarters and have been recommending "REDUCE" on the stock. We maintain our negative stance on the company.

We Maintain Reduce on weak near-term earnings on subdued order backlog, weak macro environment and higher interest burden. Balance sheet quality has also weakened considerably.

The subdued order intake due to unfavourable business environment and the stock is trading at 18.4x and 10.2x FY13 earnings and EV/EBITDA respectively.

We have been negative on the stock since past two quarters and have been recommending "REDUCE" on the stock. We maintain our negative stance on the company.

We downgrade to SELL with a revised target price of Rs 15 per share (Rs 35 earlier) based on DCF. Our implied exit multiple based on FY13 earnings works out to 11x in line with our earlier target price.

Source : Equity Bulls

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