Institutional Equities - Online Share Trading

Institutional Equities
Exhibit 4: PE ratio
Core business valued at implied PE ratio of 4x (adjusted for other business)
HCC's core construction net profit growth would be under stress during FY12 due to higher leverage
and increased working capital. However we expect net profit to grow 76.5% in FY13 on low base.
Hence, we believe it is fair to value the core business of the company at 8x PE (lower end of
historical range of PE ratio of 8x-18x for pure EPC players). Historically the stock has traded in a
wide range of 11x-75x of one-year forward earnings. It is currently trading at PE ratio of 18.7x, which
is 60% lower than five year average PE ratio of 44x. If we adjust the value of other businesses
(BOT projects and Lavasa project) in the current market price, the stock is trading at PE ratio of
4x FY13E diluted earnings.
Exhibit 5: P/BV trend
(x)
100
90
80
70
60
50
40
30
20
10
-
Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11
P/E
5 year avg
Source: Bloomberg, Nirmal Bang Institutional Equities Research
(x)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11
P/B
5 year avg
Source: Bloomberg, Nirmal Bang Institutional Equities Research
69 HCC