Technofab Engineering (TEL) - Go For It

We had carried the IPO analysis of Technofab Engineering (TEL) in our latest issue dated July 4, 2010. However, the company hadn’t announced their price band then, but we still went ahead and analysed on the information available, and estimated the price band of Rs 234-250 and recommended the company as a good long-term bet. We also said that we would update our analysis on our website www.dsij.in once the price band is announced. The issue has opened today and will close on July 2, 2010 and the company has fixed the price band much close to our estimate at Rs 230-240.

Just a recap of what the company does. TEL is basically engaged in the business of providing engineering procurement and construction (EPC) services and executes a wide range of Balance-of-Plant (BoP) and electromechanical projects on a turnkey basis. Through these services this company caters to a host of industries, which includes power, oil & gas, water and waste water infrastructure, industrial & infrastructure sector (i.e. steel, mining, sugar, cement, ports and fertiliser companies) and electrical distribution & rural electrification.

As on FY10 the company’s revenues stood at Rs 200 crore, while profits stood at Rs 19.15 crore. On the valuation front, the scrip is available at attractive PE of 12.4-13x and EV/EBDITA of 7.32-7.64, which looks fair when compared to with peers such as Sunil Hi-Tech and Techno Electric and Engineering, which are available at PE of 11x and 16x and EV/EBDITA of over 4x and 12.75x. Hence one can consider opting for the IPO at these valuations.