Punj Lloyd - Multibagger stock

CMP: 300
Research: Sharekhan

Sharekhan has maintained ‘buy’ on Punj Lloyd with a 12-18 month price target of Rs 532. The company has won an order to engineer, procure, install and commission a 211km pipeline with associated stations and infrastructure in Qatar.

The contract is valued at Rs 3,636 crore (US Dollar 800 million). This is the fourth engineering, procurement and construction order bagged by the company in Qatar alone.

The Middle-East has been one of the key business markets for the company and 27 per cent of its current order backlog constitutes of orders from this region. Sharekhan believes the investments planned in the Gulf Cooperation Council countries over 2006-12 spell a great opportunity for the company.

Punj Lloyd's increased foothold in these geographies will further enhance the company's capability to win larger and more important projects in the Gulf Cooperation Council nations.

The current order backlog of Rs 24,063 crore, which is 3.1x its 2007-08 earnings, imparts ample visibility to the company’s future revenues.

At the market price, the stock is trading at 16.6x and 12.6x FY2009E and FY2010E fully diluted earning per share respectively. Sharekhan believes the stock is attractively valued at these levels given that the company’s earnings are estimated to grow at a compounded annual growth rate of 51.2 per cent over FY2008-10E.