Buy Hindustan Construction Company; target of Rs 55: Edelweiss

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Edelweiss' research report on Hindustan Construction Company

Revenue stood at INR 9.7bn (estimate: INR 9.2bn), aided by INR 1.8bn claims recognition. Adjusting for claims, EBITDA margin stood at a healthy 12.6%. Order backlog, as at Q2FY18 end, stood at INR 215bn (INR 204bn as at FY17 end). Order intake during H1FY18 stood at INR 30bn.

Outlook

Decline in debt will improve the company’s financial health and should drive execution going ahead. The trajectory of receipt of claims money will determine stock performance going ahead. We maintain ‘BUY’ with SOTP-based target price of INR 55-INR 27/share from EPC business (valued at 18x FY19E P/E), INR 18/share from BOT projects (DCF valuation) and balance from Lavasa.

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