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