Friday, 12 February 2016 00:00

Raunaq EPC International: 3Q16 Results Review

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I had initiated Raunaq EPC International on January 27, 2016 with a view that the stock is worth accumulating. The stock has been marginally higher since then even after the broad market carnage and I remain bullish on the company’s long-term prospects.

This article discusses the company’s 3Q16 results that were released on February 4, 2016. Overall, the results can be termed as excellent and this article will discuss the points to back my opinion.

For 3Q16, Raunaq EPC International reported revenue of INR30.3 Crore as compared to revenue of INR18.3 Crore for 3Q15. This represents a 68% increase in turnover on a year-on-year basis and has been primarily due to a strong order book execution during the quarter.

For 3Q16, Raunaq EPC International reported net profit of INR1.48 Crore as compared to net profit of INR0.68 Crore for 3Q15. This represents an increase of 118% for the period with EBITDA expansion during this period.

Further, for the nine months ended December 2015, Raunaq EPC International reported EPS of INR9.93 as compared to EPS of INR6.85 for the nine months ended December 2014. Considering an annualized EPS, Raunaq EPC International is likely to report FY16 EPS of INR13.2. This is just a ball-park estimate as the EPS varies quarter-on-quarter due to project execution. Even if this EPS is considered, Raunaq EPC International is trading at a forward PE (March 2016) of 8.0 and valuations are certainly attractive from a long-term perspective.

 

A look at the company’s quality client base

Raunaq EPC International Client Base

 

An important point to note here is that Raunaq EPC International entered 2014-15 with an order book of INR134 Crore and the company entered 2015-16 with an order book of INR135 Crore. While the company has won few orders in the last nine months of the current financial year, the future revenue direction will depend on how the order inflow is in 2016 considering the point that economic activity in India and globally remains weak.

I am however optimistic on order inflow considering the initiation of smart city projects and the potential demand from the company’s core sector of power, oil & gas and water pipelines.

In conclusion, Raunaq EPC International is trading at very attractive valuations and if the budget has stress on the broad infrastructure sector, the stock will trend higher. With a clean balance sheet, low equity base, good execution capabilities, high promoter shareholding and industry triggers, the stock is worth buying.

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Note: The article is not a research report but assimilation of information available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that I have long-term positions in the stock discussed. Investors should carefully do their own research and verify points discussed before investing.

Image Source: Company Website/Company Annual Report

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