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C & C Construction
C & C Construction is a Gurgaon based infrastructure developer
providing engineering, procurement and construction services in
India and Afghanistan. While historically the company has focused
on projects in roads and highways, it has lately diversified into
power transmission, water & sanitation and commercial buildings.
In India the company mainly works for various state and central
authorities like NHAI, PWD Punjab, AAI etc.
Highest Operating Margins in the Industry
The company has specialized bidding and executing projects in adverse
terrains like Bihar and Afghanistan in order to secure better margins. It
has consistently reported operating margins of around 20% for many
years as compared to industry margins around 10%-12%.
The company moved into asset ownership by bagging its first BOT road
project in 2007. The company further strengthened its BOT projects by
bagging Mohali Inter State Bus Terminus Project (ISBT) in 2009 which
also has commercial real estate element attached to it. The company
has recently bagged three new road BOT projects including 1 in L1 stage.
The company now plans to diversify into other high growth segments
like transmission towers, water & sanitation and commercial buildings.
Attractive Valuations
Despite of expectations of strong revenue growth for the next 2-3 years
and high margins, the company currently trades at 6.5 times and 5 times
FY11 and FY12 expected earnings. We continue to believe that the stock
at current market price provides a good long term investment opportunity.
Our 1 year forward price target for the stock stands at Rs 325 which
includes Rs 292 contribution from the EPC business (8 times FY11E EPS),
Rs 19.5 per share from Kurali Kiratpur BOT project and Rs 13 per share
from Mokama Munger BOT project.
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