After dismal performance in the last fiscal, Alphageo India’s business improved in FY2010 (the current fiscal) and the growth momentum continued in Q2FY2010 despite it being a seasonally weak quarter.
The spectacular performance in Q2FY2010 was largely on the back of execution of Rs39 crore order from the Oil and Natural Gas Corporation (ONGC) in Cauvery basin (the same was highlighted in the stock update dated September 24, 2009).
What’s more, the outlook for the second half is also encouraging. Though the ONGC order worth Rs43 crore has still not commenced and could get delayed to the next fiscal, the company is likely to show robust growth in H2FY2010 on the back of execution of orders from private operators like Essar group (Rs9.4 crore), Adani group (Rs17 crore) and Selan Exploration Technology (Rs12 crore).
The order pipeline from fresh tenders is also healthy and the company hopes to announce more new orders from private operators in the coming months. The efforts to reduce the company’s dependence on public sector oil companies (like ONGC and Oil India) are yielding results now both in terms of better revenue growth outlook and improved utilisation of resources (seismic crews).
Stock Valuations
Given its strong performance in Q2FY2010, healthy order book position and improving client profile, we have significantly upgraded the estimates for FY2010 and FY2011. Consequently, we have upgraded our recommendation to Buy stocks with the price target of Rs. 297 (12x FY2011 earnings).
Source: Sharekhan stock trading broker
