Sadbhav Engineering is a construction company from Ahmedabad. It undertakes construction projects of roads,highways, irrigation and mining. Here is stock analysis of this construction and infrastructure stock to check what this could be a good stock to buy.
Business
Sadbhav Engineering (BSE: 532710, NSE: SADBHAV) is in construction, engineering and infrastructure development. Company's road construction projects include a road at Nagpur MIHAN Project (International hub airport complex), Seoni- Chiraidongri (SH-11A) road project and widening of Sambalpur - Rourkela Road Project. Its irrigation projects include Majalgaon Right Canal, improvement of Shedhi Branch Canal and construction of Narmada main Canal. It's subsidiaries include Sadbhav Infrastructure Projects Limited, Nagpur Seoni Express Way Ltd and Sadbhav Mining Limited, Mozambique.
Financials
If you look at balance sheet, Company's operating profit margin stands at 11-12% with NPM of 4-5%. This shows company's good project execution capabilities. It has low debt and interest expenses. Company's interest expense ratio to net sales is in 1-2.5% range. Company's net sales has grown by 34% to Rs 612 crore in past 18-24 months. It has an order book of Rs 6,586 crore, a big part of it's orderbook is from build-operate-transfer (BOT) projects. Roadbased projects guarantee immediate cash realisation which is not true to other construction projects.
Sadbhav Engineering has nine BOT projects. 3 BOT projects are operational and one near completion. Its projects are Maharashtra Border Check Post, Rohtak Panipat Tollway, Ahmedabad Ring Road and Mumbai-Nashik Expressway. The company has recently bagged two NHAI projects. Around 13% of company's order book is from mining projects.
Company Prospects
Mining industry has no big players and there is a huge opportunity for the company to scale up the value of projects and its clientele base. Sadbhav engineering has clients such as L&T, SAIL, Coal India and Gujarat Industries Power. Contribution of mining projects to the company's total revenues has increased from 4% to 17% in past 4 years. This contribution is expected to increase in future looking at strong revenue visibility of its mining projects.
Stock Valuations
At current stock price of Rs.112, the stock trades at P/E multiple of 12/7. Some of the construction and infrastructure stocks are trading at much higher valuations like above 35 P/E. The stock has a low debt to equity ratio of 0.65 which is good. This is a consistent dividend paying stock that shows management's commitment towards shareholders. Shareholding pattern shows promoter shareholding of 47.59% with institutional shareholding of more than 40%. This shows good shareholding pattern. Overall, it is certainly a good stock to buy from construction sector for long term investing and capital appreciation.
Business
Sadbhav Engineering (BSE: 532710, NSE: SADBHAV) is in construction, engineering and infrastructure development. Company's road construction projects include a road at Nagpur MIHAN Project (International hub airport complex), Seoni- Chiraidongri (SH-11A) road project and widening of Sambalpur - Rourkela Road Project. Its irrigation projects include Majalgaon Right Canal, improvement of Shedhi Branch Canal and construction of Narmada main Canal. It's subsidiaries include Sadbhav Infrastructure Projects Limited, Nagpur Seoni Express Way Ltd and Sadbhav Mining Limited, Mozambique.
Financials
If you look at balance sheet, Company's operating profit margin stands at 11-12% with NPM of 4-5%. This shows company's good project execution capabilities. It has low debt and interest expenses. Company's interest expense ratio to net sales is in 1-2.5% range. Company's net sales has grown by 34% to Rs 612 crore in past 18-24 months. It has an order book of Rs 6,586 crore, a big part of it's orderbook is from build-operate-transfer (BOT) projects. Roadbased projects guarantee immediate cash realisation which is not true to other construction projects.
Sadbhav Engineering has nine BOT projects. 3 BOT projects are operational and one near completion. Its projects are Maharashtra Border Check Post, Rohtak Panipat Tollway, Ahmedabad Ring Road and Mumbai-Nashik Expressway. The company has recently bagged two NHAI projects. Around 13% of company's order book is from mining projects.
Company Prospects
Mining industry has no big players and there is a huge opportunity for the company to scale up the value of projects and its clientele base. Sadbhav engineering has clients such as L&T, SAIL, Coal India and Gujarat Industries Power. Contribution of mining projects to the company's total revenues has increased from 4% to 17% in past 4 years. This contribution is expected to increase in future looking at strong revenue visibility of its mining projects.
Stock Valuations
At current stock price of Rs.112, the stock trades at P/E multiple of 12/7. Some of the construction and infrastructure stocks are trading at much higher valuations like above 35 P/E. The stock has a low debt to equity ratio of 0.65 which is good. This is a consistent dividend paying stock that shows management's commitment towards shareholders. Shareholding pattern shows promoter shareholding of 47.59% with institutional shareholding of more than 40%. This shows good shareholding pattern. Overall, it is certainly a good stock to buy from construction sector for long term investing and capital appreciation.
