Monday, October 11, 2010

PUNJ LLYOD :Contra Stock for long term Investment

Punj Lloyd Ltd :The Company is engaged in providing integrated design, engineering procurement, construction and project management services for energy and infrastructure sector. Punj Lloyd operates in four segments: Energy, Civil and Infrastructure, Power and Renewables. Its Energy segment comprises process plants, pipeline and tankage. Its Power segment provides Thermal power plants in India, upto 660 megawatt. Civil and Infrastructure business is carried on in India and Middle East & North Africa (MENA) through Punj Lloyd Ltd., whereas Sembawang Engineers and Constructors Pte Ltd. and its subsidiary, Sembawang UAE are entrusted with projects in South East Asia and MENA regions. It has its operations spread across the Middle East, Africa, the Caspian, Asia Pacific and South Asia. Punj Lloyd provides engineering procurement construction (EPC) services in Oil & Gas, Process, Civil Infrastructure, and Thermal Power.

Investment Rational:The stock is beaten down a lot due to losses incurred on the account of project execution delays from the it's acquired sub-sidiary SABIC.There are some hiccups on the project execution front but the kind of topline growth the management has achieved in the last 4-5 years means that the management is strong and capable and should be able to resolve the project execution delay issues.With the current order book of over 32000 Cr in the next couple of years the company is poised to reduce the losses due to project execution delays and come back on track.At the current stock price the stocks looks beaten down and is a good for long term contra investment.The company has formed a joint venture with the singapore based firm in the solar energy sector.Solar Energy has a lot of potential in India.The company Punj llyod Delta Renewables also bagged couple of contracts from the punjab government.

Risks: At the current price though all the bad news looks like priced in, but the next 1-2 quarter negative results might see some panic selling. Add on if it comes down for a long term for multibagger returns.

Recommended Buying price: 120-125 (add on dips)