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Summary
of Contents
STOCK UPDATE
MRO-TEK
Cluster: Apple
Green
Recommendation: Hold
Price target:
Rs113
Current market price: Rs67
Downgraded to Hold
Despite the favourable
business environment, MRO-TEK's performance is likely to be weak in
Q1FY2007 also. We expect the revenue and earnings to decline both
sequentially and on an annual comparison basis.
At the
current price the stock trades at 6.8x FY2007 and 5.5x FY2008
revised earnings estimates. We are downgrading our recommendation on
MRO-TEK to Hold and would wait for more clarity and signs of
improvement in the company's performance.
Alphageo
India
Cluster: Emerging
Star
Recommendation: Buy
Price target: Rs135
Current
market price: Rs125
Results ahead of expectations
Result highlights
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The Q4FY2006 results of Alphageo India
(Alphageo) are ahead of our estimates.
-
Shrugging off the lacklustre performance till
M9FY2006, in Q4FY2006 the company's net sales rose by 277% year on
year (yoy) and by 1,070% on a sequential basis to Rs18.83 crore.
With the weather conditions remaining benign in the north-east
region, the quarter saw full operation of all the crews (both 2D
and 3D crews).
-
The strong improvement in the top line came on
the back of the execution of the Rs8-crore 3D survey contract of
Canero. The top line also got some contribution from the
Rs45-crore 3D survey order of Oil India Ltd (OIL). All the 2D
contracts were also fully executed during the quarter.
-
The operating profit for the quarter rose to
Rs9.37 crore, marking a sequential growth of 1,624% as the
operating profit margin (OPM) improved to 49.8% from 33.8% in
Q3FY2006. The OPM improved because the margins in the 3D survey
business are higher and a 3D contract that was supposed to be
completed in seven months was completed in three months.
-
The interest charge during the quarter rose
substantially as the set of the 3D crew was funded largely through
debt. Further, depreciation increased 420% during the period, as
the company charged depreciation at a higher rate for the new 3D
equipment.
-
The company earned a net profit of Rs4.22 crore
during Q4 as against a loss of Rs31.8 lakh in the third quarter.
For FY2006, the profit after tax (PAT) stood at Rs4.2 crore
against our estimate of Rs3.2 crore.
-
Alphageo has recently secured a Rs25-crore
order. With this the order backlog now stands at Rs60 crore, which
is 2.5x its FY2006 revenues.
Thermax
Cluster: Emerging
Star
Recommendation: Buy
Price target: Rs340
Current
market price: Rs255
Business outlook maintained
The outlook
for the business of Thermax, as shared by the management in its
annual report, is in consonance with ours. There has been no
material change in our assumptions after the review of the annual
report. We have fine-tuned our consolidated earnings estimates for
FY2007 and FY2008 at Rs13.2 per share and Rs19.1 per share
respectively.
The stock is trading at a price/earnings ratio
of 13.3x FY2008E consolidated earnings and enterprise value/earnings
before interest, depreciation, tax and amortisation of 7.3x FY2008E.
The valuations are attractive considering (1) the strong order
backlog of Rs2,435 crore; (2) the positive outlook of the user
industries (hydrocarbons, steel, chemicals etc); (3) the continued
momentum in the order inflow; (4) the sustained margin expansions in
the key business segments; and (5) the strong compounded annual
growth of 50.1% in the earnings in the FY2006-08 period. We continue
to remain bullish on the company. We maintain a Buy on Thermax with
the price target of Rs340.
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