Unity Infraprojects - Q1FY14 Result Update - Kotak

- Revenues of the company improved by 7% YoY for Q1FY14 and stood in line with our estimates.

- Operating margins came at 12.4% for the quarter vis-a-vis 13.6% in Q1FY13, in line with our estimates. However, borrowings witnessed an increase during the quarter and hence net profit witnessed a decline of 27% YoY.

- We tweak our estimates to factor in higher borrowings and continued high interest rates. At current price of Rs19, stock is trading at very attractive valuations of 1.8x P/E on FY14 respectively. Though stock is trading at very attractive valuations but lack of order inflows for the company and for the entire sector has resulted in underperformance. We believe that till macroeconomic environment improves and order inflow ramps up, stock will continue to trade at lower valuations.

- We arrive at a revised target price of Rs32 based on 3x FY14 estimated earnings and continue to maintain BUY on the company mainly due to its extremely low valuations. Stock may underperform in near term due to lower order inflows but decline in interest rates going forward coupled with ramp up in order inflow would be positive for the company in long term.

Source : Equity Bulls

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