The shares of the leading infrastructure and construction services provider gained up to 3 percent after ICICI Direct, a well-known brokerage recommended a ‘buy’ rating.
With a market capitalization of Rs 4,899.32 crore, the shares of Patel Engineering Ltd were trading at Rs 63.22 apiece, increasing around 1 percent as compared to the previous closing price of Rs 62.84 per share.
Looking into Patel Engineering’s performance, revenue increased by 11 percent from Rs 955 crore in Q3 FY23 to Rs 1,061 crore in Q3 FY24. During the same period, net profit increased by 187 percent, from Rs 24 crore to Rs 69 crore.
ICICI Direct, one of the well-known brokerages in India, gave a ‘Buy’ call on the infra stock with a target price of Rs 80, indicating a potential upside of 26 percent from Tuesday’s price of Rs 63.30 per share.
Here is the reason behind the potential upside target:
● The company has a dominant presence in lucrative segments such as hydro power, tunneling, and irrigation, which collectively constitute approximately 93% of its order book. This indicates a strong focus on sectors with significant growth potential and ample opportunities for project execution and revenue generation
● The company anticipates significant ordering prospects in these segments, with noteworthy figures such as 19 GW of HEP projects sanctioned by CEA, PSPs with a capacity exceeding 20,000 MW, and a pipeline of 875 tunnels spanning approximately 2,600 km. Additionally, the allocation of Rs 93,068 crore under the PMKSY for 2021-26 further underscores the substantial market potential.
● The order inflow momentum slowed in H2FY24 due to elections but is expected to rebound post-Q1FY25. Anticipated order inflows stand at Rs 6,000 crore and Rs 10,000 crore for FY25 and FY26, respectively. This robust potential forecasts a revenue CAGR of 16.3% to reach Rs 6,612 crore by FY26.
● The company anticipates maintaining margins at 13-14%, with expectations of stability at 14.2% due to robust execution and steady raw material prices. This, combined with reduced interest costs, is projected to propel a 32.4% earnings CAGR over FY23-26E.
Ace investor Vijay Kishanlal Kedia holds 1,20,00,000 shares through its firm Kedia Securities Private Limited, which is equivalent to 1.55 percent of the company as of March 2024.
The stock has delivered a 36 percent return in six months and a 247.40 percent return in a year. If an investor invests Rs 1 lakh in the company, it would be worth Rs 3.47 lakh in a year.
Written by:- Abhishek Singh
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