With a current order book of Rs 7.4 bn, two major high-margin projects and and after completion of Uranium Corporation plant in Jharkhand, Hindustan Dor Oliver (HDO) is bidding for another in Andhra Pradesh which could be a $5 bn opportunity.
HDO reported a revenue of Rs 3.05 bn in 2007-08, an increase of 46 percent on a year-on-year basis. In the last quarter margins have shot up to 14.4% mainly because of two projects, one in Nalco in mineral beneficiation and second a fertiliser project with RCF, Mumbai, where HDO margins were better.
Of the current order book, environmental and mineral beneficiation accounts for Rs3bn and Rs3.7bn respectively. Paper, fertiliser and water accounts for another Rs750m. HDO recently won a Rs2.5bn order from Vedanta Aluminium.
Going ahead, the management expects its margin to improve by 1-1.5% from the current levels of 11.5%. At the current market price of Rs100, the stock trades at 10.8 x FY09E and 7.2x FY10E earnings of Rs9.2 and Rs13.8 respectively. “We maintain Outperformer rating on the stock with a price target of Rs138 and an upside of 38.5%,” according to Prabhudas Liladhar.
Company officials have said that around 40% of our revenue should be from minerals business, 35% from environmental and 25% from manufacturing, fertilisers and paper & pulp business.
The Vedanta order: HDO received an order worth Rs2.5bn from Vedanta Aluminium for design, engineering, procurement and other civil works for expansion of Vedanta's alumina refinery project in Orissa. This should be executable over 17 months. In the previous two years HDO completed Rs4bn worth of orders.
HDO intends to spend Rs500m on capital expenditure in FY09 which will be for manufacturing facility in Gujarat, to manufacture heat exchangers, pressure vessels, etc.
Hindustan Dorr Oliver Limited (HDO) is an Indian EPC company and a wholly owned subsidiary of IVRCL Infrastructure and Projects Ltd. It has its core business activities in providing Engineered Solutions, technologies and EPC installations in Liquid-Solid Separation applications.
Link to the article: http://www.commodityonline.com/news/topstory/HDO-rides-on-high-margin-projects-9700-3.html
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