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Hindustan Dorr Oliver: Buy

Hindustan Dorr Oliver (HDO) is one of the few small-cap engineering companies that managed to weather the current slowdown by focussing on diversification of services and offering specialised technologies through overseas tie-ups. The company’s recent order-win from Uranium Corporation of India for a greenfield ore mining and processing facility demonstrates its ability to quickly capitalise on new business opportunities. At Rs 31.8, this listed subsidiary of IVRCL Infrastructures & Projects holds strong earnings potential from a medium-term perspective. Investors can consider investing in this stock, which trades at a modest 2.8 times its expected per share earnings for FY10.

HDO’s expertise lies in providing turnkey solutions and Engineering Procurement and Construction (EPC) services in liquid solid separation applications in industries such as mineral processing, fertiliser and chemical and environmental management. The diversified operation has aided in steady order flows even in a downturn such as the present one. The company has managed a 63 per cent growth in net profits for the nine months ended FY09 compared to year-ago numbers. The profit growth would have been higher but for the steep hike in interest costs primarily on account of working capital requirements.
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