Buy Capacit’e Infraprojects; target of Rs 397: Edelweiss

Edelweiss's research report on Capacit’e Infraprojects

Capacit’e Infraprojects (Capacit’e) has etched a name for itself as a quality contractor in the buildings space since its inception in August 2012; today, it is working with almost all major real estate developers in the country. We believe it is in a sweet spot, due to: (1) RERA driven consolidation in the realty space; (2) improving work profile; (3) ability to bag repeat orders; and (4) better balance sheet (negative net debt) & leaner working capital cycle (~75 days) versus peers.

Outlook

We expect steady top-line growth, stable margin trajectory and declining debt to result in 23% revenue CAGR and 31% EPS CAGR over FY18-20. Additionally, rising scale and better cash flows will lend impetus to return ratios going ahead. We have valued Capacit’e at INR397, assigning P/E of 20x to FY20E earnings. We initiate coverage with a ‘BUY’ recommendation.