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MADHUCON PROJECTS LTD (MPL)
RECOMMENDATION: BUY
TARGET PRICE: RS.140
FY12E P/E: 9.9X
q Madhucon Projects has emerged as a key beneficiary in bagging orders
worth Rs 27 bn in annuity segment during Q4FY11
q Company is also pre-qualified to bid for other upcoming projects from
NHAI
q We marginally tweak our estimates and continue to maintain BUY on
MPL with an unchanged price target of Rs 140 based on sum-of-the-parts
valuation on FY12 estimates
We spoke to the management of Madhucon Projects and present below the key
highlights:
Robust order inflow seen in Q4FY11
Madhucon Projects Ltd has witnessed an excellent order inflow during Q4FY11 with
the award of two large road BOT projects. It has recently been awarded 163.5 km
annuity road project from NHAI worth Rs 15 bn for four laning of Ranchi-Rargaon-
Jamshedpur section of NH-33. This project is on design-build-finance-operate-transfer
(DBFOT) basis with semi annual annuity of Rs 1.33 bn and concession period of 15
years including construction period of 912 days. This project was earlier awarded to
Nagarjuna Constructions but MPL challenged the bid since it was the lowest bidder
and has finally been awarded this project.
Earlier in Feb, MPL was also awarded another annuity project for 4 laning of
Barsasat-Krishnagar section of NH-34 for 84 kms in West Bengal on DBFOT basis.
Project cost is nearly Rs 12 bn and semi annual annuity of Rs.740 mn. This project
has a concession period of 17 years including construction period of 910 days.
Thus MPL has emerged as a key beneficiary in the road projects and order inflow for
MPL has been much better than the peers. These projects would be executed in
separate subsidiary and on completion of financial closure, we expect EPC work to
be awarded to Madhucon projects itself.
Thus current order book of nearly Rs 41 bn is likely to be enhanced after financial
closure of these projects. We maintain our estimates and expect revenues to grow at
a CAGR of 24% between FY10-FY12.
Status of key projects being executed by the company
MPL has 5 road BOT projects in its portfolio with two of them being operational and
remaining two likely to get operational by FY11 end. It is also executing power
project for which construction is under progress. We present below the status of
these projects -
Road projects
n Madhucon Agra-Jaipur expressway - Toll collections are on an improving trend
and company is collecting toll of nearly Rs 10.5 lakh per day
n TN Expressway - Toll collections per day from TN expressway are also improving
and stand at nearly Rs 8 lakh per day
n Madurai - Tuticorin expressway - Company expects toll to commence by end of
March 2011
n Trichy-Thanjavur expressway - Company expects toll to commence by end of
March 2011
n Chhapra-Hazipur BOT project - Construction work has commenced on Chhapra-
Hazipur BOT project
n Barasasat-Krishnagar BOT project - Financial closure for this project is expected
by end of Q1FY11 or by Q2FY12.
n Ranchi-Rargaon-Jamshedpur DBFOT project - Financial closure for this project is
expected by end of Q1FY11 or by Q2FY12.
Power project by Simhapuri Energy Pvt Ltd, a subsidiary of
Madhucon Projects Ltd
n Phase 1 - Construction work on Phase 1 of power project was impacted in FY11
due to delays in shipments as well as extended monsoons. It is expected to complete
by June, 2011.
n Phase 2 - Construction work is under progress and targeted date of completion is
Sep, 2012.
Funding plans for the recently won projects
MPL is looking for various options for funding the equity requirements of recently
won projects as well as its existing projects. It can plan for securitization of receivables
from operational projects or raising funds through NCD's apart from internal
accruals. Company also plans to file for an IPO during FY12 for its subsidiary
Madhucon Infra for funding requirements for Phase-3 of the power project as well as
upcoming projects.
We expect Rs 3250 mn of equity investment to be funded from internal
accruals.(FY12 - Rs 1500 mn and FY13 - Rs 1750 mn) while the remaining amount is
expected to be funded through NCD's or securitization of receivables for these
projects.
Financial outlook
n Based on strong order book, we continue to maintain our revenue estimates for
the company going forward and expect revenues to grow at a CAGR of 24%
between FY10-FY12.
n We maintain our estimates and expect margins to be 11% going forward.
n We marginally tweak our borrowings estimates as well as investments expected
going ahead for the company and expect net profits to grow at a CAGR of 28%
between FY10-12. This is expected to be led by healthy growth in revenues and
stable operating margins.
Valuation and recommendation
n At current price of Rs 90, stock is trading at 11.5x and 9.9x P/E for FY11 and
FY12 respectively.
n We value the core business of the company at 7.5x FY12 estimated earnings
while other BOT projects are valued at P/BV methodology.
n Based on higher investments done in power projects, our valuation from power
segment has been enhanced while we currently remove the valuation attached
to land to factor in current slowdown seen in this segment.
n Our target price remains unchanged at Rs 140 based on sum of the parts methodology
on FY12 estimates. We would incorporate the valuations from recently
won projects once company achieves financial closure and correspondingly invests
equity in these projects.
n We maintain BUY on Madhucon Projects Ltd.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MADHUCON PROJECTS LTD (MPL)
RECOMMENDATION: BUY
TARGET PRICE: RS.140
FY12E P/E: 9.9X
q Madhucon Projects has emerged as a key beneficiary in bagging orders
worth Rs 27 bn in annuity segment during Q4FY11
q Company is also pre-qualified to bid for other upcoming projects from
NHAI
q We marginally tweak our estimates and continue to maintain BUY on
MPL with an unchanged price target of Rs 140 based on sum-of-the-parts
valuation on FY12 estimates
We spoke to the management of Madhucon Projects and present below the key
highlights:
Robust order inflow seen in Q4FY11
Madhucon Projects Ltd has witnessed an excellent order inflow during Q4FY11 with
the award of two large road BOT projects. It has recently been awarded 163.5 km
annuity road project from NHAI worth Rs 15 bn for four laning of Ranchi-Rargaon-
Jamshedpur section of NH-33. This project is on design-build-finance-operate-transfer
(DBFOT) basis with semi annual annuity of Rs 1.33 bn and concession period of 15
years including construction period of 912 days. This project was earlier awarded to
Nagarjuna Constructions but MPL challenged the bid since it was the lowest bidder
and has finally been awarded this project.
Earlier in Feb, MPL was also awarded another annuity project for 4 laning of
Barsasat-Krishnagar section of NH-34 for 84 kms in West Bengal on DBFOT basis.
Project cost is nearly Rs 12 bn and semi annual annuity of Rs.740 mn. This project
has a concession period of 17 years including construction period of 910 days.
Thus MPL has emerged as a key beneficiary in the road projects and order inflow for
MPL has been much better than the peers. These projects would be executed in
separate subsidiary and on completion of financial closure, we expect EPC work to
be awarded to Madhucon projects itself.
Thus current order book of nearly Rs 41 bn is likely to be enhanced after financial
closure of these projects. We maintain our estimates and expect revenues to grow at
a CAGR of 24% between FY10-FY12.
Status of key projects being executed by the company
MPL has 5 road BOT projects in its portfolio with two of them being operational and
remaining two likely to get operational by FY11 end. It is also executing power
project for which construction is under progress. We present below the status of
these projects -
Road projects
n Madhucon Agra-Jaipur expressway - Toll collections are on an improving trend
and company is collecting toll of nearly Rs 10.5 lakh per day
n TN Expressway - Toll collections per day from TN expressway are also improving
and stand at nearly Rs 8 lakh per day
n Madurai - Tuticorin expressway - Company expects toll to commence by end of
March 2011
n Trichy-Thanjavur expressway - Company expects toll to commence by end of
March 2011
n Chhapra-Hazipur BOT project - Construction work has commenced on Chhapra-
Hazipur BOT project
n Barasasat-Krishnagar BOT project - Financial closure for this project is expected
by end of Q1FY11 or by Q2FY12.
n Ranchi-Rargaon-Jamshedpur DBFOT project - Financial closure for this project is
expected by end of Q1FY11 or by Q2FY12.
Power project by Simhapuri Energy Pvt Ltd, a subsidiary of
Madhucon Projects Ltd
n Phase 1 - Construction work on Phase 1 of power project was impacted in FY11
due to delays in shipments as well as extended monsoons. It is expected to complete
by June, 2011.
n Phase 2 - Construction work is under progress and targeted date of completion is
Sep, 2012.
Funding plans for the recently won projects
MPL is looking for various options for funding the equity requirements of recently
won projects as well as its existing projects. It can plan for securitization of receivables
from operational projects or raising funds through NCD's apart from internal
accruals. Company also plans to file for an IPO during FY12 for its subsidiary
Madhucon Infra for funding requirements for Phase-3 of the power project as well as
upcoming projects.
We expect Rs 3250 mn of equity investment to be funded from internal
accruals.(FY12 - Rs 1500 mn and FY13 - Rs 1750 mn) while the remaining amount is
expected to be funded through NCD's or securitization of receivables for these
projects.
Financial outlook
n Based on strong order book, we continue to maintain our revenue estimates for
the company going forward and expect revenues to grow at a CAGR of 24%
between FY10-FY12.
n We maintain our estimates and expect margins to be 11% going forward.
n We marginally tweak our borrowings estimates as well as investments expected
going ahead for the company and expect net profits to grow at a CAGR of 28%
between FY10-12. This is expected to be led by healthy growth in revenues and
stable operating margins.
Valuation and recommendation
n At current price of Rs 90, stock is trading at 11.5x and 9.9x P/E for FY11 and
FY12 respectively.
n We value the core business of the company at 7.5x FY12 estimated earnings
while other BOT projects are valued at P/BV methodology.
n Based on higher investments done in power projects, our valuation from power
segment has been enhanced while we currently remove the valuation attached
to land to factor in current slowdown seen in this segment.
n Our target price remains unchanged at Rs 140 based on sum of the parts methodology
on FY12 estimates. We would incorporate the valuations from recently
won projects once company achieves financial closure and correspondingly invests
equity in these projects.
n We maintain BUY on Madhucon Projects Ltd.
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