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UNITY INFRAPROJECTS LTD
RECOMMENDATION: BUY
TARGET PRICE: RS.109
FY12E P/E: 5.0X
q Unity Infraprojects revenues reported 11.% growth for Q3FY11 vis-à-vis
same period last year. This was better than our estimates.
q Operating margin stood at 12.4% vs 12.6% for Q3FY10
q Though net profits reported a decline of 8% YoY but it was inline with
our estimates. It was impacted by increase in interest outgo as well as
bank guarantees.
q We tweak our estimates to factor in lower than expected order inflow
and higher borrowings and expect revenues to grow at a CAGR of 14%
and profits to grow at a CAGR of 6% between FY10-FY12.
q However due to lower than expected order inflow for the company, we
reduce the valuation for the core business to 7.5x FY12 estimates as
against 9x FY12 estimates earlier. Unity has so far invested Rs 1.96 bn in
the real estate venture and we thus assign P/BV of 1x for projects in
Nagpur, Pune and Goa.
q At current price of Rs 65, stock is trading at 5.4x and 5.0x P/E multiples
for FY11 and FY12 respectively. We thus arrive at a revised price target of
Rs 109 on FY12 estimates (Rs 135 earlier). We maintain BUY on the stock.
Revenue growth led by strong order book
n Unity Infraprojects revenues reported 11% growth for Q3FY11 vis-à-vis same period
last year. This was better than our estimates.
n Construction activity during Q3FY11 was also impacted due to non-availability of
sand in Maharashtra region. However, company has specified that these issues
are getting resolved now.
n Current order book of company stands at Rs 35.72 bn diversified across Rs 19.97
bn in civil, Rs 2.16 bn in roads and Rs 13.58 bn in irrigation. Order inflow for the
company in FY11 till date stood at Rs 12 bn which was lower than our expectations.
Company is currently L1 in projects worth Rs 3 bn. We thuse reduce our
order inflow expectation from Rs.17 bn to Rs.15 bn for FY11.
n Order inflow for the company was impacted by change in key ministries at the
Maharashtra state level which has resulted in delays in project awards. Along
with this, inflows remained below expectations from other states also. However,
going forward, company expects order inflow to ramp up significantly particularly
in the civil and irrigation segment.
n We tweak our revenue estimates to factor in lower order inflow and expect revenues
to grow at a CAGR of 14% between FY10-FY12.
Operating margins inline with our estimates
n Operating margins stood at 12.4% vs 12.6% for Q3FY10 and are led by diversified
order book mix.
n Due to diversified business mix of the order book, company expects to maintain
margins at the current levels.
n We increase our estimates for FY11 to 12.9% and expect margins to be 12% for
FY12.
Net profit growth inline with our estimates
n Though net profits reported a decline of 8% YoY but it was inline with our estimates.
It was impacted by increase in interest outgo as well as bank guarantees.
n Net profits were also impacted by higher interest outgo. We thus marginally
tweak our borrowings estimates and factor in higher interest rates and bank
charges for the company since company bids for nearly Rs 30 bn worth of
projects every month.
n We expect net profits to grow at a CAGR of 6% between FY10-FY12.
Valuation and recommendation
n At current price of Rs 65, stock is trading at 5.4x and 5.0x P/E multiples for FY11
and FY12 respectively.
n Due to lower than expected order inflow for the company, we reduce the valuation
for the core business to 7.5x FY12 estimates as against 9x FY12 estimates
earlier.
n Unity has so far invested Rs 1.96 bn in the real estate venture and we thus assign
P/BV of 1x for projects in Nagpur, Pune and Goa.
n We arrive at a revised price target of Rs 109 on FY12 estimates (Rs 135 earlier).
n We maintain BUY on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UNITY INFRAPROJECTS LTD
RECOMMENDATION: BUY
TARGET PRICE: RS.109
FY12E P/E: 5.0X
q Unity Infraprojects revenues reported 11.% growth for Q3FY11 vis-à-vis
same period last year. This was better than our estimates.
q Operating margin stood at 12.4% vs 12.6% for Q3FY10
q Though net profits reported a decline of 8% YoY but it was inline with
our estimates. It was impacted by increase in interest outgo as well as
bank guarantees.
q We tweak our estimates to factor in lower than expected order inflow
and higher borrowings and expect revenues to grow at a CAGR of 14%
and profits to grow at a CAGR of 6% between FY10-FY12.
q However due to lower than expected order inflow for the company, we
reduce the valuation for the core business to 7.5x FY12 estimates as
against 9x FY12 estimates earlier. Unity has so far invested Rs 1.96 bn in
the real estate venture and we thus assign P/BV of 1x for projects in
Nagpur, Pune and Goa.
q At current price of Rs 65, stock is trading at 5.4x and 5.0x P/E multiples
for FY11 and FY12 respectively. We thus arrive at a revised price target of
Rs 109 on FY12 estimates (Rs 135 earlier). We maintain BUY on the stock.
Revenue growth led by strong order book
n Unity Infraprojects revenues reported 11% growth for Q3FY11 vis-à-vis same period
last year. This was better than our estimates.
n Construction activity during Q3FY11 was also impacted due to non-availability of
sand in Maharashtra region. However, company has specified that these issues
are getting resolved now.
n Current order book of company stands at Rs 35.72 bn diversified across Rs 19.97
bn in civil, Rs 2.16 bn in roads and Rs 13.58 bn in irrigation. Order inflow for the
company in FY11 till date stood at Rs 12 bn which was lower than our expectations.
Company is currently L1 in projects worth Rs 3 bn. We thuse reduce our
order inflow expectation from Rs.17 bn to Rs.15 bn for FY11.
n Order inflow for the company was impacted by change in key ministries at the
Maharashtra state level which has resulted in delays in project awards. Along
with this, inflows remained below expectations from other states also. However,
going forward, company expects order inflow to ramp up significantly particularly
in the civil and irrigation segment.
n We tweak our revenue estimates to factor in lower order inflow and expect revenues
to grow at a CAGR of 14% between FY10-FY12.
Operating margins inline with our estimates
n Operating margins stood at 12.4% vs 12.6% for Q3FY10 and are led by diversified
order book mix.
n Due to diversified business mix of the order book, company expects to maintain
margins at the current levels.
n We increase our estimates for FY11 to 12.9% and expect margins to be 12% for
FY12.
Net profit growth inline with our estimates
n Though net profits reported a decline of 8% YoY but it was inline with our estimates.
It was impacted by increase in interest outgo as well as bank guarantees.
n Net profits were also impacted by higher interest outgo. We thus marginally
tweak our borrowings estimates and factor in higher interest rates and bank
charges for the company since company bids for nearly Rs 30 bn worth of
projects every month.
n We expect net profits to grow at a CAGR of 6% between FY10-FY12.
Valuation and recommendation
n At current price of Rs 65, stock is trading at 5.4x and 5.0x P/E multiples for FY11
and FY12 respectively.
n Due to lower than expected order inflow for the company, we reduce the valuation
for the core business to 7.5x FY12 estimates as against 9x FY12 estimates
earlier.
n Unity has so far invested Rs 1.96 bn in the real estate venture and we thus assign
P/BV of 1x for projects in Nagpur, Pune and Goa.
n We arrive at a revised price target of Rs 109 on FY12 estimates (Rs 135 earlier).
n We maintain BUY on the stock.
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