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Research
BUY Sanghvi Movers: AnandRathi Institutional Research
Posted On : 2016-02-09 22:55:05( TIMEZONE : IST )
Sanghvi Movers - Strong wind-power business helps maintain margins; Buy with a target price of Rs 497
Sanghvi Movers' Q3 revenue shot up 54.6% yoy to Rs. 1.34bn, with margins moving up 830bps yoy to 66.7%. Net profit was Rs. 282m, (up 291.8% yoy). The company expects utilisation to touch ~87% in coming years. Also, it expects to incur capex of Rs. 5bn over FY16.
Greater capacity utilisation boosts sales growth. Q3 FY16 revenue climbed a steep 54.6% yoy to Rs. 1.34bn (2.2% below our estimate). The increase was powered by growth in the share of the wind energy segment, which shot up to 57% in Q3 FY16 (from 36% in FY14). The power sector contributed ~14% in the quarter. It is now operating at 82% capacity (~58% in FY14) and expects to reach ~87%.
Robust margins. The Q3 FY16 EBITDA margin moved up sharply, by 830bps yoy to 66.7%, on account of lower fixed cost. The company expects to maintain margins of ~67-68%. The expanded margin was attributable to greater yields (3.06%). Management expects yields to stabilise ~3.06-3.1%.
High operating margin leads to profitability. Q3 FY16 net profit was Rs. 282m (up 291.8% yoy). This was driven by a healthy operating margin. 9mFY16 PAT was Rs. 790m (vs. Rs. 75m loss a year ago).
Future plans. With its mounting wind and power business, the company has planned capex of Rs. 5bn (Rs. 4.4bn earlier) for FY16 on specific crawler cranes. Till now it has incurred Rs. 3.6bn. Debt stands at Rs. 5.6bn. With all orders fully booked, we expect healthy growth.
Valuation. In order to raise yields, Sanghvi Movers is focusing on optimum capacity utilisation. It expects to flourish in Q4, with further business coming from power and wind energy. We maintain our Buy rating and assign a one-year-forward PE of 13x to derive a price target of Rs. 497. At the CMP, the stock trades at a PE of 8.6x FY18e. Risk. Further demand deterioration in infrastructure and wind power.
Shares of SANGHVI MOVERS LTD. was last trading in BSE at Rs.315.7 as compared to the previous close of Rs. 324.9. The total number of shares traded during the day was 13129 in over 195 trades.
The stock hit an intraday high of Rs. 332 and intraday low of 315. The net turnover during the day was Rs. 4173755.
