Elecon Engineering: Soon expect clarity over Brahmani Industries order
Economic Times has reported The Miglani Family (promoter of Uttam Galva Steel) along with ArcelorMIttal India has acquired Brahmani Industries that plans to set up Greenfield steel plant in Andhra Pradesh. Brahmani industries have placed order for material handling equipment pertaining to plant with Elecon Engineering (EEC) worth Rs332cr, which has been on hold. Now due to change in management we expect decision on the same, however this can either lead to execution of order or cancellation or rebidding of the order. In any case we believe this removes lot of uncertainty.
We believe an improving economic scenario (indicated by the revival in IIP), continued government focus on infrastructure spends and pick-up in private capex augur well for companies providing MHE solutions for the core sectors of the economy. The government's strong focus on the power sector, through ’Power for all by 2012’ is expected to result in an expansion of the sector’s generation capacity, leading to higher opportunities for MHE players, while the mining and port sectors would throw up combined opportunities worth around Rs7,000cr. We believe EEC is well placed to seize the upcoming opportunities in the power sector due its strong order book of Rs1,691cr at the end of January 2011 (1.6x FY2010 sales), which renders a high revenue visibility for the company.
At price of Rs 76, stock trades at 8x FY12 EPS and 6x FY12 EV/EBITDA, we maintain our Buy view on the stock with target price of Rs83.
No comments:
Post a Comment