Patel Engineering shares rally as Q1 profit growth, margin expansion lift sentiment

Shares of Patel Engineering Ltd. rose more than 3% on Monday after the infrastructure company reported a jump in quarterly profit and improved margins, even as revenue growth remained modest.

The stock climbed as much as 3.32% to ₹29.54 after the Mumbai-based company said consolidated profit after tax rose 21.7% from a year earlier to ₹98.5 crore in the quarter ended June 30. Revenue increased 3.8% to ₹1,280.7 crore.

Operating performance improved at a faster pace than sales. Earnings before interest, tax, depreciation and amortisation rose 8.6% to ₹179.6 crore, while the EBITDA margin widened to 14% from 13.4% a year earlier.

The numbers point to improved profitability despite relatively subdued top-line growth, with Patel Engineering citing project execution and operational efficiencies as factors supporting the quarter.

Core construction business strengthens

Civil construction, which accounts for almost all of Patel Engineering's revenue, recorded a 3.6% increase in sales to ₹1,276.8 crore. Segment profit rose at a faster 11.9% pace to ₹120.1 crore, from ₹107.3 crore a year earlier.

The company's much smaller real estate operation also improved, swinging to a profit of ₹2.7 crore from a loss of ₹0.7 crore a year earlier as revenue increased to ₹3.9 crore from ₹0.6 crore.

The improvement in annual earnings contrasted with a softer sequential revenue performance. Sales declined 9.9% from the March quarter, while profit more than doubled from ₹43.6 crore.

Civil construction revenue fell 10.1% sequentially, while segment profit declined 25.8%. The real estate business, however, swung from a ₹6.9 crore loss in the March quarter to a ₹2.7 crore profit.

Also read: Info Edge shares gain nearly 6% after Q1 PAT rises 43%, EBITDA up 29%

₹14,636 crore order book

Patel Engineering had an order book of ₹14,636 crore at the end of June, giving the company visibility on future revenue as it executes projects across India's infrastructure sector.

Managing Director Kavita Shirvaikar said the quarter reflected the benefits of disciplined project execution and cost management, adding that the company remained focused on improving execution efficiency and maintaining healthy liquidity.

The company also reported progress on some of its large hydropower projects.

The Subansiri Lower Hydropower Project in Arunachal Pradesh reached 1,000 MW of operational capacity following the commissioning of Unit 4, while concreting work began for Unit 7.

Dam concrete works at the Kwar Hydropower Project crossed the halfway mark during the quarter. Patel Engineering also started construction of the 1,125 MW Dorjilung Hydropower Project in Bhutan.

The company's long-term credit rating was upgraded to A from A- in June, reflecting an improvement in its financial profile.

Despite Monday's gain, Patel Engineering shares remain down about 19% over the past year and more than 39% over the past three years.