Buy Unity Infraprojects; target of Rs 56.70: BP Equities

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Buy Unity Infraprojects; target of Rs 56.70: BP Equities

BP Equities is bullish on Unity Infraprojects and has recommended buy rating on the stock with a target of Rs 56.70 in its October 10, 2011 research report.

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BP Equities is bullish on Unity Infraprojects and has recommended buy rating on the stock with a target of Rs 56.70 in its October 10, 2011 research report.

"Unity Infraprojects Ltd (UIL) is one of the leading engineering and construction company based in Mumbai. The company is the flagship unit of the Mumbai based KK Group of Companies. The company is focused in areas, such as civil construction and infrastructure development. Their projects include civil construction, transportation engineering, irrigation and water supply projects. The company has two subsidiaries, namely Unity Realty and Developers Ltd & Unity Infrastructure Assets Ltd"

"The company has a healthy order book of Rs. 38,799.10 mn (excluding L1 orders of Rs. 18,472 mn) as on 7th October,2011, which stands at ~2.3x FY11 sales, which provides the revenue visibility for next 30 months. We expect the topline to grow at a CAGR of ~24% from FY11A to FY13E as compared to CAGR of 23% from FY09A to FY11A. Going forward, we expect Unity's order inflow to remain strong on the back of the government's thrust on infrastructure spending particularly on urban infrastructure. The order book flows from diversified segments like buildings, water & irrigation and transportation. This strategy has helped the company to mitigate the risk and reduce its dependence on any particular segment. In terms of business vertical the share of water & irrigation orders is 35%, building is 53% and transportation is 12%. In terms of geographical break up about 56% of the order book is from Western Region of India, Overseas 1.9% and balance all are accounted by rest of India."

"Over a period of time UIL has build up a strong and esteemed clientele especially government clients. Of the total order book about 77% is Government orders as on August,2011 and balance is from private players. Strong and timely execution of projects has led to developing strong client relationships which has resulted in repeated orders. Most of the orders being dominated by govertment due to which the risk of cancellation of orders has been mitigated."

"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 ~24% during FY11A 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 3.1X and 2.6X FY12E and FY13E EPS of Rs. 13.6 and Rs 16.2 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. Recent foray into the BOT projects is another important trigger for the company to perform going forward. We expect the valuation gap to narrow in the medium term and the company will trade at a valuation in comparison to its peers. We recommend "Buy" and arrive at a target price of Rs. 56.70 per share which discount FY13E EPS of Rs 16.2 by 3.5x; an upside of 36%," says BP Equities research report.

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment