Simplex Infrastructures is a Buy says ICICI Securities,

Construction pure play…
Simplex Infrastructure (SIL) has seen a revival in its order inflow from
Q4FY10 and has witnessed strong order inflows of Rs 2,166 crore and
Rs 1,861 crore in Q4FY10 and Q1FY11, respectively, dispelling its muted
order inflow concern in the last few quarter. The order book of SIL
stood at Rs 12,262 crore in Q1FY11 implying 2.7x order book to bill (on
TTM basis). SIL’s well diversified order book, strong order inflow due to
private capex revival, comfortable working capital and debt position
and opportunity from new verticals make it our top pick. We have
upgraded it to BUY recommendation with a price target of Rs 549.
Uptick in order inflow, revenue growth to follow
SIL has witnessed an uptick in its order flow from Q4FY10 and reported
order inflows of Rs 2,166 crore and Rs 1,861 crore in Q4FY10 and
Q1FY11, respectively. The order book of SIL stood at Rs 12,262 crore in
Q1FY11, 2.7x order book to bill (on TTM basis). Furthermore, the
management has guided for order book at Rs 13,000-14,000 crore in
FY11. We expect SIL’s revenues to grow at 20.1% CAGR during FY10-
FY12E to Rs 6,406 crore driven by execution of the strong order book.
Diversified order book with no contentious orders
SIL’s diversified order book ensures that a slowdown in any one vertical
would not affect the company’s performance much. SIL also has a
negligible exposure to the slow moving AP region projects. Therefore, it
should not face execution risk arising from there. Furthermore, SIL also
does not have exposure to any contentious and captive orders unlike its
peers making it a better bet based on the quality of the order book.
Comfortable working capital and debt levels
SIL enjoys a comfortable working capital position with net working capital
to sales at 28.3% in FY10 (103 days in terms of no. of days) compared to
its peers who operated at an average of 50.9% net working capital to
sales in FY10 (286 days in terms of no. of days). Given the better control
on working capital position, SIL is better placed in terms of net debt to
equity and cash flow positions compared to its peers.
Valuation
At the CMP, the stock is trading at 12.4X FY12 EPS and 1.9x FY12 P/BV.
We have upgraded it to BUY recommendation with revised price target
of Rs 549. We value the core construction business at Rs 542 (14x FY12E
EPS) and oil rig business at Rs 7 per share based on FCFE methodology.