Sadbhav Engineering (SEL) posted a contraction of 18% y-o-y in top line and 32% y-o-y in PAT in Q2FY20 as land availability issues again derailed execution. These issues now seem to be getting resolved and, hence, execution should gather steam ahead. The ongoing economic slowdown dragged toll collection in the BOT portfolio by 2% y-o-y. Incremental order-wins, ramp-up in execution, and conclusion of the BOT stake sale process is key to stock performance in our view.
We are raising FY20/21e earnings by 7%/17% factoring in the lower tax rate, but cutting the PE from 12x to 10x as road order awards are likely to remain slow.
