Buy HCC – TP Rs.78
Buy call on Hindustan Construction Company is maintained with a one year target price of Rs.78.
The company is expected to report 8.3% revenue growth for 2QFY11 at Rs.850 crore.
Company’s projects in Jammu & Kashmir were affected by the recent unrest in the state, which has disturbed project execution.
Operating profit for the quarter may fall to 12.5% and the interest cost is expected at Rs.56.4 crore because of increase in debt to Rs.2500 crore from Rs.2100 crore for 2QFY10.
As a result, PAT is expected at Rs.11.8 crore from Rs. 29. 7 crore for the same period in the previous quarter.
Problems in the J&K had reduced resource movement in the troubled times and this would have affected project execution.
The company has been implementing some irrigation projects in Andhra Pradesh and its progress has also been slow.
It seems that the second half of FY11 may be challenging. However, buy call is maintained with the same target price of Rs.78, considering the long term view.