Patel Engineering (PATEN)
Patel Engineering (PATEN)
Patel Engineering (PATEN)
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VALUATION<br />
Core business valuation<br />
<strong>Patel</strong>’s core business comprises of multipurpose power, irrigation<br />
and transport business. The company has set up in-house<br />
capability for the purpose of its business lines. We expect net sales<br />
to grow at a 22% CAGR over FY07-FY10E, while the EPS will see a<br />
28% CAGR during the same period due to higher margins.<br />
Margins are expected to improve due to scalability, experience and<br />
higher margin revenue mix which would help company to make<br />
higher margins and thus would command higher P/E multiple. We<br />
have valued the company at 15x its FY09E EPS which gives us a<br />
value of its Core business at Rs 418. FY09E EPS reflects earnings<br />
form core business and does not include any income form real<br />
estate business.<br />
Exhibit 22: P/E band<br />
900<br />
700<br />
500<br />
300<br />
100<br />
Apr-05<br />
Jul-05<br />
Source: ICICIdirect Research<br />
Oct-05<br />
Jan-06<br />
Apr-06<br />
Jul-06<br />
`<br />
Oct-06<br />
Jan-07<br />
Apr-07<br />
Jul-07<br />
Oct-07<br />
Jan-08<br />
14 | P age<br />
30X<br />
25X<br />
21X<br />
18X
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