Buy Unity Infraprojects; target Rs 61: Kotak Securities

Kotak Securities is bullish on Unity Infraprojects and has recommended buy rating on the stock with a target price of Rs 61 in its January 17, 2013 research report.

"Unity Infraprojects, order inflow for the company in the current fiscal till date stands at nearly Rs 17.7 bn diversified across building, water and road segment. However, it is lower than the management's expectation of nearly Rs 45 bn of order inflow in the current fiscal. Order inflow during the fiscal also continued to remain impacted by delays in project clearances, administrative hassles as well as capex deferrals by private sector. Though company is L1 in orders worth Rs 5-6 bn in buildings, water supply and roads segment but it has reduced the order inflow expectations to Rs 25-30 bn for the current fiscal. We currently maintain our order inflow estimates for the company. Going ahead, in terms of various states, company expects order inflow to boost from state like Gujarat, UP and Bihar while it may remain subdued from Maharashtra. Order inflow from Rajasthan, MP and New Delhi may slow down after first six months of this calendar year due to election schedule in these regions in December, 2013. We maintain our estimates and expect revenues to grow at a CAGR of 8% between FY12-FY14. In order to contain working capital cycle, company has also slowed down the execution due to delays in payments from clients mainly government clients. This coupled with lower than expected order inflows are the reasons for our low revenue growth estimates. Due to diversified mix of projects, operating margins are expected to remain strong at 14% going forward. We expect net profit growth to be impacted by higher interest outgo and hence we maintain our estimates and expect net profits of Rs 1.06 bn and Rs 1.12 bn for FY13 and FY14 respectively. At current price of Rs 43, stock is trading at extremely low valuations of 3.0x and 2.8x P/E on FY13 and FY14 respectively. We maintain our price target of Rs 61 based on 4x FY14 estimated earnings. Though order inflow has slowed down across the entire sector, we continue to maintain BUY on Unity Infraprojects mainly due to its low valuations. Company is also expected to benefit from decline in the interest rates going forward. Key risk to our recommendation and estimates may come from lower than expected execution or order inflow," says Kotak Securities research report. Shares held by Mutual Funds/UTI 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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