Buy Unity Infraprojects; target Rs 92: Sushil Finance

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Buy Unity Infraprojects; target Rs 92: Sushil Finance

Sushil Finance is bullish on Unity Infraprojects (UIL) and has recommended buy rating on the stock with a target of Rs 92 in its November 18, 2011 research report.

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Sushil Finance is bullish on Unity Infraprojects (UIL) and has recommended buy rating on the stock with a target of Rs 92 in its November 18, 2011 research report.

"Unity Infraprojects (UIL) has reported subdued set of numbers for the quarter ended September'11 which was below our expectations. Revenues grew by ~13% YoY to Rs.3903 mn whereas PAT de-grew by 4% to Rs.206 mn. Revenues grew by ~13% YoY from Rs.3465 mn in Q2FY11 to Rs.3903 mn in Q2FY12 which was slightly lower than our expectations. Lower revenue growth was mainly on account of delays in execution due to extended monsoons. Of the total revenues in Q2FY12, ~70% was contributed from Civil Construction, 18% from Irrigation while remaining was from Transportation segment. Revenues in H1FY12 grew by ~12% from Rs.6873 mn in H1FY11 to Rs.7675 in H1FY12."

"Operating profit grew by ~28% YoY to Rs.632 mn in Q2FY12, while margins improved by 190 bps to 16.2% which was mainly on back of lower construction & other expenses. Operating profit for H1FY12 increased by 20% to Rs.1135 mn while margins improved by 100 bps to 14.8%. High debt coupled with rising interest rates led to spike in interest cost which increased by ~78% from Rs.176 mn in Q2FY11 to Rs.314 mn in Q2FY12. High interest cost led to de-growth in net profits by ~4% YoY to Rs.206 mn whereas margins dipped by 90 bps to 5.3%. In H1FY12, net profit de-grew by 2% to Rs.402 mn on back of rise in interest cost which increased by ~60% to Rs.536 mn which in turn led to margin decline by 80 bps to 5.2%. EPS for Q2FY12 & H1FY12 stood at Rs.2.8 & Rs.5.4 respectively which is lower than our expectation of Rs.5.8."

"Unity has a healthy order-book position of ~ Rs.38 bn (2.1x FY11 Revenues) 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 bn. Also the Company has outstanding bids to the tune of Rs.38 bn. Of the total O/B position, ~54% is attributed towards Civil Construction, 30% is from Irrigation while the remaining comes from Transportation segment. The company was successful in securing orders worth Rs.15 bn in H1FY12."

"Unity Infra has reported subdued set of numbers for the quarter ended September'11 which was below our expectations. Rising debt coupled with increasing interest rates have hampered the profitability of the company over the last two quarters. Assuming the high interest rate scenario to prevail over the next few quarters, we have downward revised our earnings estimates for FY12E & FY13E by ~10% & 5% to Rs.13.2 & Rs.15.4 respectively. At the CMP of Rs.32, the stock is attractively quoting at 2.1x & 0.3x its FY13E EPS and BV of Rs.15.4 & Rs.115 respectively. However considering the healthy order-book position coupled with its strong execution capabilities, we maintain our 'BUY' rating on the stock with a revised price target of Rs.92 (based on 6x FY13E EPS)," says Sushil Finance research report.

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To read the full report click on the attachment