Buy Unity Infra; target of Rs 106: Sushil Finance

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Buy Unity Infra; target of Rs 106: Sushil Finance

Sushil Finance is bullish on Unity Infra and has recommended buy rating on the stock with a target of Rs 106 in its August 26, 2011 research report.

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Sushil Finance is bullish on Unity Infra and has recommended buy rating on the stock with a target of Rs 106 in its August 26, 2011 research report.

"Unity Infraprojects Ltd. (UIL) has reported subdued numbers for the quarter ended June'11 which was slightly below our expectations. Revenues grew by ~11% YoY to Rs.3772 mn whereas PAT was flattish at Rs.196 mn."

"Revenues grew by ~11% YoY from Rs.3408 mn in Q1FY11 to Rs.3772 mn in Q1FY12 which was slightly lower than our expectations. Lower revenue growth was mainly on account of early onset of monsoon coupled with delays in irrigation projects due to some local issues. Of the total revenues in Q1FY12, ~54% was contributed from Civil Construction, 32% from Irrigation while remaining was from Transportation segment. Operating profit grew by ~11% YoY to Rs.502 mn in Q1FY12, whereas margins remained flat at 13.3%. Raw-material consumption & Construction expenses increased by 11% and 10% to Rs.1654 mn & Rs.1400 mn respectively. High debt on back of higher working capital requirement coupled with rising interest rates led to spike in interest cost which increased by ~39% from Rs.160 mn in Q1FY11 to Rs.222 mn in Q1FY12. High interest cost led to flattish growth in net profits which grew by 0.3% YoY to Rs.196 mn in Q1FY12 whereas margins dipped by 50 bps to 5.2%. EPS for Q1FY12 stood at Rs.2.6 v/s our expectation of Rs.2.9."

"Unity has a healthy order-book position of ~ Rs.35 bn which is executable over a period of 27-30 months, thus providing strong revenue growth visibility over the next few years. Apart from the above O/B position, the Company is L1 in contracts worth Rs.15.6 bn. Also the Company has outstanding bids to the tune of Rs.30 bn. Of the total O/B position, ~53% is attributed towards Civil Construction, 35% is from Irrigation while the remaining comes from Transportation segment. The company was successful in securing orders worth Rs.7.8 bn till August'11. In terms of geographical spread, majority of the O/B is from West & North region which contributes ~56% & 31% respectively. Government orders constitute ~77% of the total O/B position & ~90% of the contracts have inbuilt price escalation clause."

"Unity Infra has reported subdued numbers for the quarter ended June'11 which was slightly below our expectations. However healthy order-book position coupled with strong execution capabilities provides good revenue visibility over the next few years. Also diversification across verticals would act as cushion against slowdown in any particular segment. At the CMP of Rs.52, the stock is quoting at 3.2x & 0.4x its FY13E EPS and BV of Rs.16.2 & Rs.116 respectively. Hence considering the strong growth prospects of the Company, we maintain our 'BUY' rating on the stock with a price target of Rs 106 (based on 6.5x FY13E EPS)," says Sushil Finance research report.

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