Sadbhav Engineering’s (SEL) topline de-grew 2.7% YoY to | 807.0 crore (our estimate: | 929.4 crore) on account of a sharp decline in revenues from irrigation division (slumped 64% YoY to | 72.3 crore) . The EBITDA margin was flat YoY at 10.8% and was above our estimate of 10.3% on account of lower other expenses (3.3% as a percentage of sales in Q1FY17 vs. 3.8% in Q1FY16). PAT grew 23.4% YoY to | 48.7 crore (our estimate: | 40.7 crore) despite a lower topline on account of lower-than-expected effective tax rate [(0.5% in Q1FY17 vs. our estimate of 20.0%) due to a MAT credit entitlement of | 10.4 crore in Q1FY17]. On a PBT level, at ~| 48.9 crore, it was largely in line with our estimate of | 50.8 crore.

They believe Sadbhav is well poised to capture opportunities across sectors given its healthy orderbook, strong execution capabilities and a robust order pipeline. Consequently, we expect its earnings to grow at 27.5% CAGR in FY16-FY18E. Hence, we maintain our BUY recommendation on the stock with an SOTP based revised TP of | 330. We have valued SEL’s 68% stake in SIPL at | 157/share and EPC business at | 175/share (8x FY18 EV/EBITDA implying 13.6x FY18 EPS).