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MPL achieves financial closure for its road project – A positive development
Madhucon Projects Ltd. (MPL) has achieved financial closure (FC) for Chhapra-Hajipur
Expressway DBFOT project. The total funds tied are worth `585cr. The project was
awarded by NHAI in May 2010 on DBFOT basis with a concession period of 15 years,
including a construction period of 30 months. This is positive as the company will be able
to book EPC revenue in the coming quarters from this project, thus boosting its
overall revenue.
The key triggers to watch out for MPL should be the pick-up in execution in the
development business and building of an attractive asset portfolio before it plans to raise
money via IPO, which would fructify somewhere in FY2012 only and based on the market
conditions prevailing then. Hence, we believe till then the stock would be a sector
performer and the real value would be created only on unlocking at the subsidiary level.
We maintain our Buy view on the stock with an SOTP Target Price of `173, implying an
upside of 42% from current levels. Our SOTP target price is arrived by assigning a P/E of
10x on FY2012E earnings (`92.1/share); we have valued the BOT projects on NPV basis
(`52.0/share) and other investments in Madhucon Infra and the real estate venture on BV
basis (`25.2/share and `3.9/share, respectively).
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