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Centrum Wealth
Sanghvi Movers (Buy)
CMP: ₹298
Target: ₹448
Sanghvi Movers Ltd (SML) is the largest crane rental company in India and is ranked eighth largest in the world. It has over two decades of presence in the crane rental business and provides heavy lift, plant erection and skilled manpower services to turnkey projects.
SML has a fleet of 384 medium to large sized heavy duty cranes, 13 depots across India and enjoys market share of about 75 per cent in the more than 100 tonne crane segment. Given the improving demand scenario in the user industry, especially in wind energy sector (54 per cent of revenue), we expect SML to improve its utilisation levels to 75 per cent in FY17E from 55 per cent in FY14.
We estimate revenue CAGR of 26 per cent and operating margins to expand by 715 bps to 61.3 per cent over FY15-17E as it will benefit from economies of scale. Further, with majority of capex behind and high operating margins, we expect SML to generate steady free cash flow going forward and reduce debt. At current price, the stock trades at 5.7x FY17E EV/Ebitda.
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