Buy MEP Infrastructure; target of Rs 70: Antique

Antique Stock Broking's report on MEP Infrastructure DevelopersThe National Highways Authority of India (NHAI) has initiated awarding of tolling projects from FY10-end and has bid out ~6,800km of national highways for tolling till FY14. We expect it to increase 1.3x to ~9,000km by FY18. As majority of the projects are now being awarded under the engineering, procurement and construction (EPC) route, which will inturn later be awarded for tolling, the scope for winning additional projects remains high. In operations, maintenance and tolling (OMT) segment, ~2,760km has been awarded till FY15, which is expected to increase by ~2,200-2,400km by FY18. Over and above the NHAI opportunities, various state highway projects are also expected to emerge for bidding in the toll collection and OMT space.MEP Infrastructure Developers (MEPIDL) being the largest player in both the road tolling and OMT segments will be a major beneficiary. In the OMT space, we expect 47-48 new projects to come up for awarding between the states and Centre by FY18. At present, the company has a share of ~14% in total OMT projects operated by private developers. Even if we were to assume a reduction in market share to ~10% owing to increase in competition, MEPIDL should be able to bag at least five new long-term OMT projects over the next two-to-three years. At present, we have not built any new OMT wins in our numbers. New long-term OMT project wins would further skew the revenue mix in favour of long-term projects."As projects mature and traffic picks-up, its profitability is expected to improve further due to relatively low capital intensive nature of the business. We expect the company to report a ~48% profit CAGR during FY16-18e. We initiate coverage on MEPIDL with a Buy rating and a target price of INR70 per share. At the current market price, the stock is trading at 8.6x FY18e P/E with a 33% RoE", says Antique Stock Broking.For all recommendations, click here 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.

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