Buy Patel Engineering; target of 529: Karvy


Mumbai: Karvy Stock Broking is bullish on Patel Engineering and has recommended buy rating on the stock with a target of 529. The company's consolidated sales increased 24 percent to 11.97 crore during the quarter ended March 2010 from 9.65 crore in financial year 2009. Patel Engineering is an infrastructure company engaged in civil construction. The Company's projects include heavy construction, earth and rock excavations, housing complexes, building projects, dams, tunnels, bridges, refineries, factories, steel projects, thermal and hydro power house, pre-stressed and pre-cast concrete, marine works, and public health works. Patel Engineering (Mauritius), Patel Energy Resources, Patel Realty (India), Patel Engineering (Singapore), Patel Engineering Infrastructure, Friends Nirman, Patel Concrete and Quarries and Patel Engineering are among the subsidiaries of the company. Though the company has largely maintained its earnings before interest, taxes, depreciation and amortization (EBITDA) margins in the range of 16-18 percent, since last 6 quarters, this quarter is there has been a dent of 280basis point in its EBITDA margin to 12.6 percent. Karvy believes going ahead real estate would speed up the development process of projects and start contributing to bottom-line from Financial Year 2012 onwards. The company's first phase power venture has cleared the preliminary stage and would attain the financial closure in Financial Year 2011. With the recommended target price of 529, if the stock is bought at Thursday's closing price of 398.30, the percentage of gain would be 24.70 percent.