SBI Cap Research has initiated coverage on Om Metals Infraprojects with a BUY Rating and the following REcommendation,
The company is the largest hydro-mechanical equipment supplier in India with a market share of over 60 percent and nearly 4 decades of experience in successful execution and completion of turnkey hydro-mechanical contracts for hydropower and irrigation. The company presently has Rs 636 crore orders book, which is 3.5x of its H1FY10 annualised sales and it is expected to be completed in next 3 years.
The company has nearly 1.5 million Sq.ft of saleable land bank situated at Hyderabad, Jaipur, Mumbai, Faridabad, Kota etc This land bank is valued at
Rs 248 crore which works out to Rs 26 per share. The Company has recently forayed into the Infrastructure segment by winning two contracts for the development of a port and an SEZ in Pondicherry. The SEZ project is multi-product SEZ spread over 860 acres and the company has a 20 percent stake in it.
We have valued the company by the 'Sum of the Parts' valuation method, in which we have taken the value of its core business and the BV of its land bank
for the purpose of valuation. At the current price of Rs30, the stock is trading at 7.3x and 5.3x of its core FY10E and FY11E earnings respectively. As per our Sum of the Parts valuation, we recommend a buy on the stock with a price target of Rs39 thus providing an upside potential of 30%.
