Tecpro Systems Ltd - Stock Idea

Tecpro Systems Ltd. (TSL) is an established material handling company with presence in the coal handling (19% market share) and ash handling (15% market share) for power, steel, cement and other sectors. TSL has recently forayed into BoP segment and has secured two orders worth INR 29.7bn (68% of its current order-book). We believe TSL would be key beneficiary, given its leadership position in material / ash handling business and strong growth in underlying industry. With revenue and profit expected to grow at CAGR of 25% and 18% respectively over FY13, recommend Buy on the stock for price target of INR 300 (+25%).

Investment Rationale

Ø  Strong positive outlook for core infrastructure industry, directly linked, augurs well for the business prospects of TSL

Ø  Established player (executed highest orders for coal handling during eleventh five year plan) in ash and material handling segment and foray into BoP segment (synchronization and diversification) would lead to growth with diversification

Ø  Having secured orders in Waste heat recovery (WHR) from Cement Industry, order intake momentum in this segment is likely continue

Ø  Strong technical expertise (in-house and through collaborations) enables TSL to offer its product and services on turnkey basis within a stipulated time at competitive rates

Ø  Clientele with strong base mitigates risk of project deferment or cancellation

Ø  Revenue visibility over FY13e on the back of strong order-book of INR 43.7bn (2.2x FY11 sales)

Outlook & Valuation

At the CMP, TSL trades at 6.6x our FY13e earnings estimate, EV/Sales of 0.4x and EV/EBITDA of 3.4x (FY13e). We expect company to generate RoE of 22.1% in FY13e . Given 18% CAGR growth of its net profit over FY13 and RoCE of 27%, we set price objective of INR 300 (exit PE of 8x its FY13e earning per share of INR 37.7).

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