Sadbhav Engineering: Low debt, consistent growth record make the company an attractive investment option

October 18, 2011

Ahmedabad-based Sadbhav Engineering is a diversified construction company, with projects related to construction of roads and highways, irrigation and mining. It has completed over 48 projects across these sectors. A substantial portion of the company’s revenues — around 70% –comes from road projects, while the remaining comes from mining (17%) and irrigation (13%) projects.

INVESTMENT RATIONALE : Sadbhav Engineering’s ability to maintain margins consistently makes it a good investment prospect. In the last five financial years, the company has been able to maintain its operating profit margin at 11-12% and net profit margin at 4-5%. This seen in the light of the changing interest rate scenario indicates the company’s sound project execution ability. Another factor that has helped the company maintain margins is its low debt and interest expense. Even as interest rates have increased over the last year-and a-half to June 2011, the company’s interest expense as a percentage of net sales has stayed in the 1-2.5% range, while the company’s net sales have grown by 34% to Rs 612 crore in the same period. It has an order book of Rs 6,586 crore, a big chunk of which comes from build-operate-transfer (BOT) projects.


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