Buy Capacite's Infraprojects; target of Rs 162: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Capacite's Infraprojects

CAPACITE reported a washout quarter with revenues falling over 94% YoY led by nationwide lockdown and severe impact of Covid-19 pandemic in MMR and Pune region, thereby restricting execution to pick-up. However, company resumed operations in 32 sites (~90% of OB) by end of July’20. On the labour availability front, company currently has ~4,000 workmen (vs ~9,200 pre-covid) with technicians already reaching pre-covid levels and expects to reach ~5,000 workmen by end of Aug’20 and ~7000 levels post-monsoon. With strong order book from marquee clients, company anticipates substantial ramp-up in execution from H2FY21 onwards. We believe that CAPACITE is well-positioned to gain traction driven by a) impressive execution track record with stable margins; b) healthy order book (Rs103.9bn as on 1QFY21, excluding MHADA orders) c) lean balance sheet with healthy return ratios; d) strong management pedigree; and e) asset-light business model.

Outlook

At CMP, the stock trades at an EV of 4.8x/2.9x FY21E/FY22E EBITDA. We maintain BUY rating with TP of Rs162.

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