Patels Airtemp
Cluster: Emerging Star
Recommendation: Buy
Price target revised to Rs103
Result highlights
Patels Airtemp’s Q2FY2009 results are slightly below our expectations on account of a lower than expected growth in its top line. The company’s net sales rose by 26.5% to Rs22 crore in the quarter.
The operating profit margin (OPM) remained firm at 18.2%, declining only slightly by 80 basis points year on year (yoy) and by 60 basis points on sequential comparison. Consequently, the operating profit grew by 21.4% to Rs4.0 crore during the quarter. Stable interest and depreciation costs led to a profit growth of 26.1% to Rs2.1 crore.
Currently, the company has an order book of Rs52 crore, executable in the next six to nine months. The management also hopes to maintain its margins going forward. The order inflows so far have remained steady for the company. The company bagged a big order of Rs16.1 crore during the second quarter for Essar Oil’s refinery project in Gujarat.
At the current market price the stock is available at 2.3x FY2009E earnings and 2x FY2010E earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs103, valuing the company at 6x FY2010E earnings.
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