Patel Engineering (PATEN)

Order-book mix shifting towards high-margin business
The revenue mix is moving in favour of hydro and multipurpose
power projects where the margins are higher. The order mix is
expected to improve the margins of the company by 150 bps in next
financial year. These projects are long gestation projects, but the
business mix is moving in favour of power (56% to 66%), where
margins are higher than irrigation and transport projects.
Exhibit 15: Projected order-book mix for next 3 years
120
100
80
60
40
20
0
4
40
56
22
38
40
20
26 24 19
25 16 16
55 58 60
FY05 FY06 FY07 FY08 FY09E FY10E
Source: Company, ICICIdirect Research
Multipurpose Power Irrigation and water supply Transpor and others
The company has a focused approach on high margin projects and a
right mix of short as well as long gestation projects. The company’s
EBITDA margins are on the higher end of the comparable peer set
spectrum (13.6%- FY07).
Plans to unlock value from land bank; Real estate; NAV at Rs 344 per
share
Patel has forayed into real estate development and has transferred
the development rights of 987 acres of land in various cities to its
100% subsidiary, Patel Realty. The company has finalised
development plans for 124 acres at the initial stage. Apart from this,
Patel also has another 186 acres of land which it does not wish to
take on hand for development as on date.
Exhibit 16: Land bank details
Location Area ( acres)
Hyderabad 650
Chennai 190
Bangalore 100
Panvel 20
Mumbai 6.5
Mysore 20
Total
Source: Company, ICICIdirect Research
986.5
8 | P age
15
66