>HINDUSTAN DORR OLIVER LTD. (PINC RESEARCH)

Hindustan Dorr Oliver Ltd’s (HDOL) Q4FY09 results were in line with our expectations. Its revenues grew 77.8% YoY to ~Rs1.9bn backed by robust execution across mineral beneficiation segment. OPM for the period dipped by 595bps YoY to 8.4% owing to higher cost of raw materials at ~83% of net sales. Despite an other income of Rs13mn, net profits fell by 9.3% YoY to Rs87mn.

■ Fresh order inflows at ~Rs4.7bn: HDOL bagged couple of new orders in Q4FY09, taking the total order inflows in FY09 to Rs9.6bn. The major order bagged during the quarter is worth Rs4.4bn involving commissioning of a greenfield Ore mining & processing facility of 3,000 MTPD at Tumalapalle in Andhra Pradesh on LSTK basis. The process plant, adopting Alkali Pressure Leaching process will be executed in technical collaboration with Bateman, South Africa & is
slated to be completed in 22 months.

■ Strong Order book at Rs13.1bn: HDOL maintains a healthy order backlog of 1.9x FY10E revenues. The company has already bagged orders amounting to Rs905mn till date in FY10. While metal & mineral beneficiation accounts for ~67% of the total order backlog, environmental management & manufacturing orders score 25% & 5.4% respectively. ~50% of orders in the present backlog emanate from various governmental agencies & are fixed price in nature.

VALUATIONS AND RECOMMENDATION
At the CMP of Rs76, HDOL trades at a P/E of 6.9x & EV/EBIDTA of 4.7x its FY10E earnings. We are of the opinion that its current valuations are fair despite the considerable growth shown by the company in the past. We believe HDOL’s capability across successful execution of bigger & more complex projects, requiring prudent working capital management, still remains to be seen. Hence, we value the company at Rs88 (8x FY10E EPS) & maintain our ‘HOLD’ recommendation on the stock.

To see full report: HINDUSTAN DORR OLIVER LTD.