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Buy This Small Cap Stock With A Target Price of Rs. 332: ICICI Securities
ICICI Securities, a well-known Indian brokerage firm, has advised investors to buy Techno Electric & Engineering Company Ltd stock with a target price of Rs 332. The brokerage has put a buy call on the stock of Techno Electric & Engineering Company Ltd. (TEECL), one of India's most prominent power-infrastructure companies, estimating a gain of roughly 26% from the prevailing market price.
According to the brokerage "Techno Electric & Engineering (TEEC) has reported 193bps YoY increase in margins to 31%, offsetting the subdued 6.4% YoY revenue growth to Rs2.7bn. Order intake is likely to pick up in H2FY22E led by FGD and Power Grid ordering. The management is guiding Rs20bn worth of order intake in FY22E and is L1 in Rs4bn worth of orders. TEEC plans to enter data centre market with an investment outlay of Rs10bn over the next 2 years - it expects 23% RoE from the same."
ICICI Securities has said in its research report that "During H1FY22, the company booked orders worth Rs5.7bn. The company is L1 in Rs4bn worth of orders, majority of which are close to finalisation. The management is guiding for Rs20bn worth of order intake in FY22E of which FGD is expected to be Rs12bn, Rs5bn from the transmission and Rs2bn from smart meters."
According to the brokerage's research report "Despite challenges, the company is confident of maintaining margins at ~15%. Given a healthy growth outlook and cashflow, we maintain BUY with a revised SoTP-based target price of Rs332. We believe the foray into data centre business will be positive in the long run as it gives an avenue to utilise the wind power efficiently and provides the company a foothold in a promising growth segment."
"Using the SoTP methodology, we value the standalone EPC business at Rs211 (20x FY23E earnings), discounted cashflow from wind assets at Rs44, transmission assets at Rs10 per share and cash and equivalents at Rs66 per share" said ICICI Securities.
ICICI Securities claims that "Given the muted H1FY22 execution, we cut FY22E and FY23E consolidated earnings estimates by 10% and 22%, respectively. Given the strong balance sheet with cash and equivalents of Rs8bn, healthy order intake outlook and the recent foray into lucrative data centre segment, we maintain BUY on the stock with revised SoTPbased target price of Rs332 (previously: Rs411)."
Disclaimer
The above stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
