Sadbhav Engineering Ltd. (SEL) delivered strong 1QFY17 RPAT beat, ~39% ahead of our estimates, aided by Rs 104mn MAT credit entitlement. Despite adjusting for the MAT credit, APAT of Rs 382mn was ~9% above our estimates. The debt on the balance sheet stood at Rs 12.5bn (Rs 1bn increase QoQ) mainly comprising working capital debt with gross standalone D/E at 0.82x.On the back of a strong order pipeline, the management is confident on achieving its FY17E order inflow guidance of Rs 50-70bn, which augurs well for our FY16-18E net revenues/APAT CAGR of 16/41%. Maintain BUY with TP of Rs 324/sh.
Valuation: They maintain BUY stance on SEL with SOTP-based target price of Rs 324/share, value the (1) Standalone EPC business at Rs 211/share (15x one-year forward Mar-18 EPS) and (2) SEL stake in SIPL at 20% holding company discount to current market capitalization at Rs 108/sh.