Patel Engineering : Kotak Securities

Patel Engineering
CMP: Rs 391.80
Target Price: Rs 485

The retail broking arm of Kotak Securities has upgraded its rating on
Patel Engineering from hold to 'buy' with a price target of Rs 485.
"Patel Engineering enjoys very good margins as compared with other
construction players due to its focus on the higher margin hydropower
construction projects. Hydropower projects have operating margins in
the range of 17-22% while irrigation projects have margins in the
range of 7-15%," the Kotak Securities note to clients said. "With a
current order book of approximately Rs 50 billion, we expect the
company to grow its revenues at a compounded annual growth rate of
30%. Adjusted with the subsidiary and land bank valuations, it is
trading at 14.3 times and 11.4 times P/E multiples on FY08 and FY09
estimates, respectively," the note added.