Result Update: Vascon Engineers Ltd (VEL) - BUY - TP Rs.57 - Kotak

Vascon Engineers (VEL) reported strong revenue growth in Q3FY18 due to high contribution from real estate business in the quarter. Net sales for the quarter grew at 84.8% yoy to Rs 935 mn with EBITDA turning positive at Rs.65mn and PAT going up to Rs.25 mn, which was inline with estimates. But the contribution from EPC segment was below our estimates at Rs 520 mn Vs estimates of Rs 571 mn as its new projects would contribute meaningfully from Q4FY18 onwards. VEL has external order backlog of Rs Rs 6.7 bn and internal order book of Rs 2.3 bn at the end of Q3FY18. VEL has added Rs 3.7 bn of new orders in 9MFY18 and is well placed in order worth Rs 1.6 bn which is at final stage of awarding. Further, it has strong bid pipeline of Rs 10 bn of new orders which is expected to be finalized in next 8-12 months. The company is expected to re-launch Windermere project in Pune by end of February 2018 and would launch affordable housing project at Katvi, Pune in April 2018. It also intends to launch four more real estate projects in FY19E which includes two projects in affordable housing space. Its subsidiary GMP is doing well after exiting services business. We have revised our estimates for EPC business in FY18E and FY19E assuming some shift in execution of large size project. We maintain our positive view on the company based on pickup in order book and traction in real estate business. We maintain BUY on VEL with revised SOTP based target price of Rs 57 (Vs Rs 60 earlier)

Shares of Vascon Engineers Ltd was last trading in BSE at Rs.39.45 as compared to the previous close of Rs. 38.9. The total number of shares traded during the day was 126518 in over 597 trades.

The stock hit an intraday high of Rs. 40.05 and intraday low of 39. The net turnover during the day was Rs. 5000473.

Source : Equity Bulls

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