Buy Unity Infraprojects; target of Rs 61: BP Equities

BP Equities is bullish on Unity Infraprojects and has recommended buy rating on the stock with a target of Rs 61 in its June 26, 2012 research report.

“Unity Infraprojects has registered a decent revenue growth of 25.7% yoy to Rs. 7,176 mn. The growth was supported by strong execution of orders especially form the civil construction segment. The company has guided a revenue growth of 15-20% going forward. During the quarter we saw a decline in EBIDTA margins by 136 bps yoy to 12.5%. The decline as mainly due to rise in material cost as a percentage of sales by 450 bps yoy. The management has guided to maintain its EBIDTA margins in the range of 13-13.5% going forward. PAT margins remained flat and stood at 5.4% during the quarter. Margins were flat due to decline in effective tax rate by 757 bps yoy to 31.2%. The management has guided to maintain its PAT margins at ~5% going forward. Average cost of borrowing stood at 14% during the quarter.”
“Closing order book as on date stands at Rs. 42 bn (83% govt. orders and balance private) while, the L1 orders stands at Rs. 10.5 bn (L1 break up - 72% building, 23% transport and 5% water segment). The order book to bill ratio stands at ~2.1x FY12 sales. Favorable order book gives us the revenue visibility of next 24-30 months. The segmental order book break up stands at 49% from building, 24% from water & irrigation and balance 28% from transport segment. Order inflow during FY12 had been phenomenal and stood at ~Rs. 30.2 bn and the management expects ~Rs 50 bn of order inflow during FY13 (which includes L1 orders). The region wise break up of order book stands at 51% from North, 41% from West, 7% from South, 1% from East and ~0.85% from overseas market. The construction work is at its peak at Chomu to Mahla road BOT project awarded by PWD, Jaipur at Rajasthan.”
“The other two road BOT project bagged by the company is for Punjab/ Haryana border and other for Suratgarh - Sriganganager, Rajasthan. The concession agreement for the new BOT road project is underway and the management expects to complete the financial closure within 3-4 months post confirmation of concession agreement. The company is expected to raise money to the extent of Rs. 1,750 mn by diluting its stake in two SPV’s. The company is in talks with a couple of Private Equity firms to raise the amount under two SPV’s at project level. The management hopes to finalize the deal in next 2-3 months. The company has identified Bangalore real estate project and another Nagpur hotel project in which it would dilute its stake to private equity firms.”
“We expect the company’s top line to grow at a healthy CAGR rate of ~17% during FY12 to FY14E. 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 2.8X and 2.6X FY13E and FY14E EPS of Rs. 15.3 and Rs 16.8 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. 61 per share which discount FY13E EPS of Rs 15.3 by 4.0x; an upside of 42%,” says BP Equities research report.  FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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