This Multibagger Capital Goods Stock Zoomed 70% In 3 Months, Hit 52 Week High, Buy, Says Geojit

Geojit has given a buy call to Power Mech Projects Ltd. (POWM) stock for a decent gain of up to 13% in 12 months with a target price of Rs 2,609 per share. POWM is a small-cap capital goods sector stock having a market cap of Rs 8,843.61 crore.

POWM is a leading infrastructure construction company based in Hyderabad with a global presence. The company bagged a new FGD order of Rs.6,163cr, from Adani Group and a civil order of Rs .499cr from BMRCL during this quarter. Current order book of Rs.24,076cr, which is 7.8x TTM revenue (incl. 9,294cr of mining order) provides strong visibility.

Stock outlook & Returns

The stock last traded at Rs 2,307.25 per share on NSE, up 2.24% from its previous close. The stock today hit, On 2 December 2022 hit its fresh 52 week high at Rs 2,354. Its 52 week low is Rs 804.85 recorded on 30 March 2022. 

The stock surged 7.99% in a week, and 33.64% in 1 month, respectively. Inc3 months it grew 69.18%, and 140,63% multibagger returns in 1 year, respectively. In 3 years the stock gave 268.48% multiabagger returns and in 5 years, it gave 215.07% multibagger returns, respectively. 

Segment revenue, boost top line

The company reported its highest-ever revenue of Rs.771cr in Q2FY23, which was 43% higher than the previous year. Domestic business contributed 87%, while overseas business contributed 13%. The reported PAT for Q2FY23 was Rs. 42.6cr, compared to Rs.27cr in Q2FY22. The EBITDA margin stood at 11.2%, when compared to 10.7% in Q2FY22. The performance was primarily fuelled by a strong execution across all segments. Growth in segment revenues backed up top-line growth, with Erection/O&M/Civil showing a 52%/20%/66% increase when compared to Q2 FY22. The current orderbook is mainly composed of 39.4% in power segments and 60.8% in non-power segments. This demonstrates that the company is constantly seeking better diversification in its business segments. 

New orders provides future visibility

The company has received a FGD order from Adani Group worth Rs.6163cr, which is expected to be executed over a period of 30 months, and a civil order worth Rs.499.4cr to construct a depot cum workshop for Bangalore Metro Rail Corporation Ltd. (BMRCL). The management counts on the FGD project to contribute to the top line by Q4FY23 and a total of Rs.400cr to be added to the year from the project. The MDO order from Coal India is anticipated to begin from Q4FY24. The company has currently received Rs.774cr worth orders this quarter and has a projection of adding Rs.300cr worth of orders over the coming quarters. Strong order inflow is expected in erection, O&M and civil segments. Furthermore, the company is taking efforts to improve the Electrical business segment. The current order book stands at Rs.24,076cr (including MDO order of Rs.9,294cr). 

Margins to improve

The EBITDA margin was 11.2%, up 51 bps YoY, and the PAT was Rs. 43 crore, up 58% YoY. "Given the expectation of improved execution in the coming quarters, the company expects the margins to improve further. We upgrade our margin estimates to 11.4%/11.7% in FY23/FY24," the brokerage said. 

 

Valuation and Outlook

The brokerage said, "With a robust order pipeline, strong execution across most of the verticals, and efforts to enhance the Electrical business segment, we anticipate that the company's margin to improve. Therefore, we remain optimistic on the stock and value Power Mech Projects Ltd. (POWM) at a P/E of 10x FY24E and reiterate our Buy rating with a revised target price to Rs. 2,609."

Disclaimer

The stock has been picked from the brokerage report of Geojit. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.