Buy Unity Infraprojects; target Rs 48: BP Equities

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Buy Unity Infraprojects; target Rs 48: BP Equities

BP Equities has maintained buy rating on Unity Infraprojects with a target price of Rs 48 in its November 24, 2011 research report.

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BP Equities has maintained buy rating on Unity Infraprojects with a target price of Rs 48 in its November 24, 2011 research report.

"The company has registered revenue growth of 12.6% yoy to Rs. 3,903 mn. The growth was supported by higher execution of orders from the building segment. The overall execution was slow due to heavy monsoons during the quarter which resulted in modest topline growth. Revenue contribution form various segments; building 70%, water & irrigation 18% and transport 12% respectively. For the half year H1FY12 we saw revenue growth of 11.7% yoy to Rs. 7,675 mn. Management has guided a topline growth of ~20% during FY12."

"EBIDTA margins improved by 190 bps yoy to 16.2%. We saw this improvement mainly due to reduction in construction expenses as a percentage of sales by 240 bps yoy and reduction in other expenses by 9.5% yoy. Lower construction expenses was due to lower sub contracting of equipments and usage of own equipments. For the half year H1FY12 margins stood at 14.8% an improvement of 98 bps yoy. Management has guided to maintain EBIDTA margins in the range of 13% to 14% during FY12."

"PAT margins has taken a hit and stood at 5.3% decline of 93 bps yoy. Decline in margins was due to rise in cost of borrowing which stood at Rs. 314 mn as against Rs. 176 mn yoy, a rise of 78.5% yoy. Interest cost as a percentage of sales stood at 8% rise of 297 bps yoy. Average cost of borrowing for the quarter stood at 14.25%. Effective tax rate for the quarter stood at 30%. Management has guided a bottom line growth of ~25% during FY12."

"In view of the growing order book, efficient execution of ongoing projects and improving track record, we expect the company's top line to grow at a healthy CAGR rate of ~23% during FY11 to FY13E. We have valued the business on relative valuation basis by assigning P/E multiple to its standalone business. UIL trades at a P/E of 2.3X and 1.9X FY12E and FY13E EPS of Rs. 13.1 and Rs 15.9 per share, which we think is available at a discount to its peers considering its healthy order book, high growth rate and healthy return ratios. We maintain "Buy" and arrive at a target price of Rs. 48 per share which discount FY13E EPS of Rs 15.9 by 3.0x; an upside of 60%, says BP Equities research report.

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To read the full report click on the attachment