Buy Hindustan Constr; target of Rs 194: Angel Broking

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Buy Hindustan Constr; target of Rs 194: Angel Broking

Broking house Angel Broking has maintained buy rating on Hindustan Construction Company with a target of Rs 194.

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Hind Constr BSE | NSE 28/05/12 Are Mutual Funds betting on Hind Constr?

Broking house Angel Broking has maintained buy rating on Hindustan Construction Company with a target of Rs 194.

Angel Broking report on Hindustan Construction Company:

Hydro Power potential yet to be fully tapped:

"Hydro power construction has always been Hindustan Construction Company's (HCC) forte. In India 1,05,247 MW of Hydro power is yet to be developed. Further, better margins in Hydro power projects than other segments of infrastructure, provides cushion to the company's profitability."

Indo US nuclear deal will be a bonus:

"HCC enjoys leadership in construction of Nuclear power plants as it has been involved in setting up more than 50% of current installed nuclear capacity. With Indo US nuclear deal materialising, a total capacity of 40,000 MW will be ready by the year 2030."

Improving order book mix:

"Company is witnessing steady growth in its order book mainly due to bigger ticket size orders from Hydro power. Its order book as of September 2006 has grown 24% YoY to Rs 9819 crore, out of which Hydro and Nuclear power accounts for 47%. Increased share of hydro and nuclear power in the order book will lead to better operating margins which are currently subdued."

Real Estate: Brave, Risky but Lucrative Opportunity:

"We foresee huge demand going forward for residential households with proportion of urban population expected to increase to 30% by 2011. Being a construction company having an experience of executing large projects across multiple geographical locations, gives high probability of success for HCC in its real estate venture."

Valuation:

"At the CMP, the stock trades at 26.8x FY2008E and 13.9x FY2009E earnings of Rs 5.3 and Rs 10.1, respectively. We have used 'sum-of-the-parts valuation' for our analysis. Our price target is derived by valuing the core business on DCF basis which gives a fair value of Rs 152 and the value of real estate business is Rs 41.7. We recommend a Buy with a 12 month target price of Rs 194."