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Company Description
Unity Infra projects Ltd., (UIPL) is a leading infrastructure company. Started as
an EPC contractor, UIPL is now a full fledged infrastructure company with
specialization in civil construction (transportation) and infrastructure segments
(irrigation & water supply). UIPL has also forayed into new areas like real
estate development, road projects on BOT basis & telecom.
Investment Rationale
Ø Diversified and sound order-book of INR 35.7 bn (2.4x its FY10 revenue)
provides revenue visibility over FY13e. About 76% of its order-book is state
sponsored projects entails low risk to deferment or cancellation of projects.
Ø Increasing ticket size of the contract (increased from ~INR 650Mn in FY05 to
~INR 5.7bn in FY10) enables to mitigate the margin risk involved in small
and scattered projects.
Ø Proven track record of completing complex projects in time and higher Networth enables to bid for larger projects. UIPL's net worth has increased
post QIP (Dec'10 by INR 730Mn) which entails it to bid for bigger projects.
Concerns
Ø Further increase in commodity prices and high cost of debt could be a
material threat to our earning estimates.
Ø Another major threat to our earning estimates would be lower than our
expectation of order intake over FY13e. Within our earning estimate, we
have factored in order-book growth of +15% and +10% for FY12 and FY13
respectively, which in our views seems to be achievable.
Outlook & Valuation
UIPL is trading at attractive valuation. Since FY07, UIPL has been trading at 5x
its one year forward earning whereas it is currently available at FY13e PE of
4.4x.
Given the a) stock trading at low of its one year forward earning since FY07, b)
revenue visibility over 2.5 years, C) revenue and EPs growing at CAGR of 17%
and 33% respectively over FY13e, Buy for target price of INR 86, +25%.
Company Description
Unity Infra projects Ltd., (UIPL) is a Mumbai based leading infrastructure
company with proven execution track record of over 30 years. Started as an
EPC contractor, UIPL is now a full fledged infrastructure company with
specialization in civil construction (transportation) and infrastructure segments
(irrigation & water supply). UIPL has to its credit of building various stadiums,
airports, railway stations and irrigation projects in the country. UIPL has also
forayed into new areas like real estate development, road projects on BOT basis
& telecom.
Civil Constructions segment undertakes to construct residential and commercial
buildings, mass housing projects, township, industrial structures, airports,
infotech parks, hotels and hospitals, education complex, stadium, railway
stations etc. While transportation division undertakes construction of roads,
bridges, flyovers, subways and tunnels, the Irrigation & Water supply verticals
undertakes project relating to dams, tunnels, lift irrigation, water supply and
sewerage and micro tunnelling.
Investment Rationale
Diversified and sound order-book of INR 35.7 bn provides revenue visibility
over FY13
UIPL has proven execution capability with growing asset base. Its diversified
and sound order-book of ~INR 35.73bn (2.4x its FY10 revenue) provides revenue
visibility over next 2.4 years. More than 75% of its orders are from state
sponsored projects and remaining 25% comes from private sector. So there is
low concern as to the cancellation or deferment of projects.
UIPL is not regional player but has well diversified order-book span across
states in India. About 73.7% of its current order-book is to be executed in the
state of Maharashtra rest 26.3% is in the state of AP, Delhi, UP, Haryana, Karnataka
etc.
Increasing Ticket size of the contract
With proven execution record, the average ticket size of the order for UIPL has
increased from ~INR 650Mn in FY05 to ~INR 5,725Mn. The big ticket size orders
enable to deploy the resources effectively resulting in better operating profit
margin. With gaining expertise in micro tunnelling and projects involving higher
engineering skills, it now competes with its peers who are established in
constructions. UIPL's net worth has also increased post QIP (Dec'10 by INR
730Mn) which enables it to bid for bigger projects
Proven track record of completing complex project in time
UIPL has to its credit of completing complex projects in time. Like a) expansion
o f t e r m i n a l 1 B a t M u m b a i A i r p o r t w i t h o u t d i s r u p t i n g o p e r a t i o n s , b )
strengthening of Tansa dam execution without emptying Dam and c) rabale
railway station built on operational railway line. This makes it the most eligible
contender to bid for complex projects, going forward.
Attractive Valuation
UIPL is currently trading at 4.1x our FY13e earning estimate. Historically, it has
been trading at average one year forward earning of 5x since FY07. With revenue
and profit expected to grow at CAGR of 16.7x and 33x over FY11-13, stock is
trading at EV/Sales ratio of 0.4x and EV/EBITDA of 2.7x (FY13e).
Risks & Concerns
Rising commodity prices and higher cost to serve debt
UIPL like its peers is also exposed to the risk of rise in raw material prices. Although,
over more than 70% of its orders are from the state sponsored projects and are
covered with price escalation clause, severe uptick in commodity prices may impact
its operating profit margin. Besides, higher interest rate regime also leads to low
incremental growth in orders. The current cost of debt of UIPL is ~12%.
UIPL aims to launch its Bangalore project now and its Kolkata project in Q2FY2012.
Goa property development will take another three-four months, once more clarity
comes due to political issues. Further, there is no progress as far as the Nagpur
project is concerned.
We have not factored in the value of its investment in real-estate venture which
works out to ~INR 13/shares, (0.5x P/BV). This adds as margin of safety to our
valuation. UIPL has so far invested INR 1.96bn in its real estate port folio of property
situated at Nagpur, Pune and Goa. So, there is upside risk to our price target for
any successful and timely land development.
Financ ial s
For FY12 and FY13, we expect UIPL to register sales and profit CAGR of 16.7% and
33% respectively with RoCE of 19%(FY13e). We also expect its Debt to come down
to 0.5x its equity from current level of 1.2x.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Company Description
Unity Infra projects Ltd., (UIPL) is a leading infrastructure company. Started as
an EPC contractor, UIPL is now a full fledged infrastructure company with
specialization in civil construction (transportation) and infrastructure segments
(irrigation & water supply). UIPL has also forayed into new areas like real
estate development, road projects on BOT basis & telecom.
Investment Rationale
Ø Diversified and sound order-book of INR 35.7 bn (2.4x its FY10 revenue)
provides revenue visibility over FY13e. About 76% of its order-book is state
sponsored projects entails low risk to deferment or cancellation of projects.
Ø Increasing ticket size of the contract (increased from ~INR 650Mn in FY05 to
~INR 5.7bn in FY10) enables to mitigate the margin risk involved in small
and scattered projects.
Ø Proven track record of completing complex projects in time and higher Networth enables to bid for larger projects. UIPL's net worth has increased
post QIP (Dec'10 by INR 730Mn) which entails it to bid for bigger projects.
Concerns
Ø Further increase in commodity prices and high cost of debt could be a
material threat to our earning estimates.
Ø Another major threat to our earning estimates would be lower than our
expectation of order intake over FY13e. Within our earning estimate, we
have factored in order-book growth of +15% and +10% for FY12 and FY13
respectively, which in our views seems to be achievable.
Outlook & Valuation
UIPL is trading at attractive valuation. Since FY07, UIPL has been trading at 5x
its one year forward earning whereas it is currently available at FY13e PE of
4.4x.
Given the a) stock trading at low of its one year forward earning since FY07, b)
revenue visibility over 2.5 years, C) revenue and EPs growing at CAGR of 17%
and 33% respectively over FY13e, Buy for target price of INR 86, +25%.
Company Description
Unity Infra projects Ltd., (UIPL) is a Mumbai based leading infrastructure
company with proven execution track record of over 30 years. Started as an
EPC contractor, UIPL is now a full fledged infrastructure company with
specialization in civil construction (transportation) and infrastructure segments
(irrigation & water supply). UIPL has to its credit of building various stadiums,
airports, railway stations and irrigation projects in the country. UIPL has also
forayed into new areas like real estate development, road projects on BOT basis
& telecom.
Civil Constructions segment undertakes to construct residential and commercial
buildings, mass housing projects, township, industrial structures, airports,
infotech parks, hotels and hospitals, education complex, stadium, railway
stations etc. While transportation division undertakes construction of roads,
bridges, flyovers, subways and tunnels, the Irrigation & Water supply verticals
undertakes project relating to dams, tunnels, lift irrigation, water supply and
sewerage and micro tunnelling.
Investment Rationale
Diversified and sound order-book of INR 35.7 bn provides revenue visibility
over FY13
UIPL has proven execution capability with growing asset base. Its diversified
and sound order-book of ~INR 35.73bn (2.4x its FY10 revenue) provides revenue
visibility over next 2.4 years. More than 75% of its orders are from state
sponsored projects and remaining 25% comes from private sector. So there is
low concern as to the cancellation or deferment of projects.
UIPL is not regional player but has well diversified order-book span across
states in India. About 73.7% of its current order-book is to be executed in the
state of Maharashtra rest 26.3% is in the state of AP, Delhi, UP, Haryana, Karnataka
etc.
Increasing Ticket size of the contract
With proven execution record, the average ticket size of the order for UIPL has
increased from ~INR 650Mn in FY05 to ~INR 5,725Mn. The big ticket size orders
enable to deploy the resources effectively resulting in better operating profit
margin. With gaining expertise in micro tunnelling and projects involving higher
engineering skills, it now competes with its peers who are established in
constructions. UIPL's net worth has also increased post QIP (Dec'10 by INR
730Mn) which enables it to bid for bigger projects
Proven track record of completing complex project in time
UIPL has to its credit of completing complex projects in time. Like a) expansion
o f t e r m i n a l 1 B a t M u m b a i A i r p o r t w i t h o u t d i s r u p t i n g o p e r a t i o n s , b )
strengthening of Tansa dam execution without emptying Dam and c) rabale
railway station built on operational railway line. This makes it the most eligible
contender to bid for complex projects, going forward.
Attractive Valuation
UIPL is currently trading at 4.1x our FY13e earning estimate. Historically, it has
been trading at average one year forward earning of 5x since FY07. With revenue
and profit expected to grow at CAGR of 16.7x and 33x over FY11-13, stock is
trading at EV/Sales ratio of 0.4x and EV/EBITDA of 2.7x (FY13e).
Risks & Concerns
Rising commodity prices and higher cost to serve debt
UIPL like its peers is also exposed to the risk of rise in raw material prices. Although,
over more than 70% of its orders are from the state sponsored projects and are
covered with price escalation clause, severe uptick in commodity prices may impact
its operating profit margin. Besides, higher interest rate regime also leads to low
incremental growth in orders. The current cost of debt of UIPL is ~12%.
UIPL aims to launch its Bangalore project now and its Kolkata project in Q2FY2012.
Goa property development will take another three-four months, once more clarity
comes due to political issues. Further, there is no progress as far as the Nagpur
project is concerned.
We have not factored in the value of its investment in real-estate venture which
works out to ~INR 13/shares, (0.5x P/BV). This adds as margin of safety to our
valuation. UIPL has so far invested INR 1.96bn in its real estate port folio of property
situated at Nagpur, Pune and Goa. So, there is upside risk to our price target for
any successful and timely land development.
Financ ial s
For FY12 and FY13, we expect UIPL to register sales and profit CAGR of 16.7% and
33% respectively with RoCE of 19%(FY13e). We also expect its Debt to come down
to 0.5x its equity from current level of 1.2x.
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