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UNITY INFRAPROJECTS
PRICE: RS.49 RECOMMENDATION: BUY
TARGET PRICE: RS.86 FY12E (PE): 3.7X
We recently met with the management to understand the industry scenario
in terms of order inflow as well as competition. Company is confident of
achieving Rs 40 bn worth of order inflow diversified across buildings, water
supply and transportation. Stock is trading at very attractive valuations and
we maintain BUY recommendation on Unity Infraprojects. We present
below the key highlights about the company -
q Order inflow remained strong for Unity Infra during FY12 till date
q Restructuring the company into strategic business verticals to enable
faster order intake
q We maintain our estimates and BUY rating on the company.
Order inflow scenario
Order inflow during FY11 for the sector was impacted due to issues such as land acquisition
and right of way issues which delayed overall project award process. With
the recent land acquisition bill, project award process is expected to improve in comparison
with last year. Along with this, company has indicated that government has
also realized the need to fasten the project award process and thus expects order
inflow for the sector as a whole to improve in H2FY12. Company has specified that
though award process was quite slow in Maharashtra in past couple of quarters, it is
likely to remain slow in near term due to upcoming BMC elections. However, significant
opportunities are coming from other states such as MP, Gujarat and Bihar.
Unity infra has bagged orders worth Rs 1.7 bn for canals and dams from state of
Madhya Pradesh during FY12 till date while it is L1 in orders worth Rs 2bn from
Gujarat. Company's overall L1 status stands at nearly Rs 15 bn diversified across
Vizag, Delhi, Bangalore and Gujarat.
Company has also restructured its business in strategic business verticals such as
transport, buildings and water. Each vertical is headed by experienced CEO's and
supported by respective teams and resources. This strategy has helped the company
achieve an order inflow of nearly Rs 7.8 bn in FY12 till date and L1 status of nearly
Rs 15 bn diversified across these segments. Order inflow has improved significantly
for the company during FY12 as against Rs 12 bn of order inflow during entire FY11.
Company expects an order inflow of nearly Rs 40 bn for FY12. We however remain
conservative in our estimates and expect an order inflow of Rs 25 bn for FY12.
Status of key projects
Work is progressing on schedule now for an order worth Rs 6.2bn in joint venture
with Axelia Utility Management Pvt Ltd from Municipal Corporation of Greater
Mumbai(MCGM) for supply, installation and maintenance of AMR water meters of
various sizes for the Eastern and Western Suburbs of Mumbai. This project is nearly
50% complete now and company expects to complete this project by Sep, 2012.
Along with this, project worth Rs 11.5bn executed in JV with IVRCL for construction
of 8.3km long tunnel from Kapurbawadi to Bhandup complex is also running ahead
of schedule. It expects to complete this project in next 2.5 years.
Company also bagged a road project worth Rs 1.98 bn for two-laning of section
from Chomu to Mahla via Renwal, Jobnerin the State of Rajasthan through Public
Private Partnership on Design, Build, Finance Operate and Transfer (DBFOT) basis for
a concession period of 25 years. Financial closure for this project is expected to be
done by Oct, 2011 and construction is likely to commence from Dec, 2011. Company
expects initial toll collections after completion of construction to be nearly Rs
150-160 mn per year.
Progress on real estate projects
Unity Infra has invested in the real estate sector for acquiring land parcels at various
places through its subsidiary Unity Realty and Developers Ltd (URDL). We present
below the details of these investments as well as projects -
n Mall development at Nagpur - URDL has already invested Rs 360mn in Nagpur
real estate project for construction of 6 retail malls. But company has been given
land parcels for only three malls and land for remaining three parcels is still to be
given to the company. Company is in talks with Nagpur Municipal Corporation
about future viability of these projects.
n Development of IT park in Goa - For development of IT park in Goa, company
had acquired 40,000 sq m of land at a total investment of Rs 100mn. But due to
pending clearances from the government, work has not yet commenced.
n Hotel project in Pune -. Company has exited from Hotel venture in Pune and
has sold its stake to Kamath Hotels for Rs 450 mn to be given over next 3 years
as against Rs 350 mn invested in this project. It has already received its first
tranche of Rs 150 mn payment in Feb, 2011.
n Real estate development in Calcutta and Bangalore - Unity has also acquired
land parcels in Calcutta and Bangalore for development of residential
townships. It has acquired 15 acres of land in Bangalore at a total cost of Rs
390mn and 25 acres in Calcutta at a total cost of Rs 750mn. Company is still
awaiting certain clearances before commencement of Bangalore real estate
project launch. This is expected by Sep-Oct, 2011 and project would be launched
only after that.
However, progress on these projects is much slower than our expectations and we
thus currently don't incorporate any valuation from these projects in our target price
calculation.
Financial outlook
n With a strong order book of nearly Rs 35 bn, we maintain our estimates and
expect revenues to grow at a CAGR of 12% in FY11-FY13. We remain conservative
in our order inflow and execution estimates as against company's expectation
of Rs 40 bn worth of order inflow.
n Operating margins are expected to remain strong due to focus towards higher
margin buildings and water supply related projects. Though margins stood at
13% during Q1FY12, but we factor in slightly higher competition going ahead
and expect margins to be around 12.5% for the company going forward.
n Interest costs are likely to remain high during FY12 due to higher interest rates.
However, company expects to reduce overall borrowings going forward through
efficient working capital management as well as through stake sale in in Nagpur
real estate project. We thus maintain our estimates and expect net profits to
grow at a CAGR of 10% between FY11-FY13.
Valuation and recommendation
n At current price of Rs 49, stock is trading very attractive valuations of at 3.7x and
3.2x P/E and 3.9x and 3.7x EV/EBITDA multiples for FY12 and FY13 respectively.
n We maintain our estimates and target price for the company. We also don't ascribe
any valuations for the real estate segment due to delays seen in launch of
projects in Bangalore and Kolkata.
n We maintain our price target of Rs 86 on FY12 estimates based on 6.5x FY12
estimated earnings and continue to maintain BUY on the company.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UNITY INFRAPROJECTS
PRICE: RS.49 RECOMMENDATION: BUY
TARGET PRICE: RS.86 FY12E (PE): 3.7X
We recently met with the management to understand the industry scenario
in terms of order inflow as well as competition. Company is confident of
achieving Rs 40 bn worth of order inflow diversified across buildings, water
supply and transportation. Stock is trading at very attractive valuations and
we maintain BUY recommendation on Unity Infraprojects. We present
below the key highlights about the company -
q Order inflow remained strong for Unity Infra during FY12 till date
q Restructuring the company into strategic business verticals to enable
faster order intake
q We maintain our estimates and BUY rating on the company.
Order inflow scenario
Order inflow during FY11 for the sector was impacted due to issues such as land acquisition
and right of way issues which delayed overall project award process. With
the recent land acquisition bill, project award process is expected to improve in comparison
with last year. Along with this, company has indicated that government has
also realized the need to fasten the project award process and thus expects order
inflow for the sector as a whole to improve in H2FY12. Company has specified that
though award process was quite slow in Maharashtra in past couple of quarters, it is
likely to remain slow in near term due to upcoming BMC elections. However, significant
opportunities are coming from other states such as MP, Gujarat and Bihar.
Unity infra has bagged orders worth Rs 1.7 bn for canals and dams from state of
Madhya Pradesh during FY12 till date while it is L1 in orders worth Rs 2bn from
Gujarat. Company's overall L1 status stands at nearly Rs 15 bn diversified across
Vizag, Delhi, Bangalore and Gujarat.
Company has also restructured its business in strategic business verticals such as
transport, buildings and water. Each vertical is headed by experienced CEO's and
supported by respective teams and resources. This strategy has helped the company
achieve an order inflow of nearly Rs 7.8 bn in FY12 till date and L1 status of nearly
Rs 15 bn diversified across these segments. Order inflow has improved significantly
for the company during FY12 as against Rs 12 bn of order inflow during entire FY11.
Company expects an order inflow of nearly Rs 40 bn for FY12. We however remain
conservative in our estimates and expect an order inflow of Rs 25 bn for FY12.
Status of key projects
Work is progressing on schedule now for an order worth Rs 6.2bn in joint venture
with Axelia Utility Management Pvt Ltd from Municipal Corporation of Greater
Mumbai(MCGM) for supply, installation and maintenance of AMR water meters of
various sizes for the Eastern and Western Suburbs of Mumbai. This project is nearly
50% complete now and company expects to complete this project by Sep, 2012.
Along with this, project worth Rs 11.5bn executed in JV with IVRCL for construction
of 8.3km long tunnel from Kapurbawadi to Bhandup complex is also running ahead
of schedule. It expects to complete this project in next 2.5 years.
Company also bagged a road project worth Rs 1.98 bn for two-laning of section
from Chomu to Mahla via Renwal, Jobnerin the State of Rajasthan through Public
Private Partnership on Design, Build, Finance Operate and Transfer (DBFOT) basis for
a concession period of 25 years. Financial closure for this project is expected to be
done by Oct, 2011 and construction is likely to commence from Dec, 2011. Company
expects initial toll collections after completion of construction to be nearly Rs
150-160 mn per year.
Progress on real estate projects
Unity Infra has invested in the real estate sector for acquiring land parcels at various
places through its subsidiary Unity Realty and Developers Ltd (URDL). We present
below the details of these investments as well as projects -
n Mall development at Nagpur - URDL has already invested Rs 360mn in Nagpur
real estate project for construction of 6 retail malls. But company has been given
land parcels for only three malls and land for remaining three parcels is still to be
given to the company. Company is in talks with Nagpur Municipal Corporation
about future viability of these projects.
n Development of IT park in Goa - For development of IT park in Goa, company
had acquired 40,000 sq m of land at a total investment of Rs 100mn. But due to
pending clearances from the government, work has not yet commenced.
n Hotel project in Pune -. Company has exited from Hotel venture in Pune and
has sold its stake to Kamath Hotels for Rs 450 mn to be given over next 3 years
as against Rs 350 mn invested in this project. It has already received its first
tranche of Rs 150 mn payment in Feb, 2011.
n Real estate development in Calcutta and Bangalore - Unity has also acquired
land parcels in Calcutta and Bangalore for development of residential
townships. It has acquired 15 acres of land in Bangalore at a total cost of Rs
390mn and 25 acres in Calcutta at a total cost of Rs 750mn. Company is still
awaiting certain clearances before commencement of Bangalore real estate
project launch. This is expected by Sep-Oct, 2011 and project would be launched
only after that.
However, progress on these projects is much slower than our expectations and we
thus currently don't incorporate any valuation from these projects in our target price
calculation.
Financial outlook
n With a strong order book of nearly Rs 35 bn, we maintain our estimates and
expect revenues to grow at a CAGR of 12% in FY11-FY13. We remain conservative
in our order inflow and execution estimates as against company's expectation
of Rs 40 bn worth of order inflow.
n Operating margins are expected to remain strong due to focus towards higher
margin buildings and water supply related projects. Though margins stood at
13% during Q1FY12, but we factor in slightly higher competition going ahead
and expect margins to be around 12.5% for the company going forward.
n Interest costs are likely to remain high during FY12 due to higher interest rates.
However, company expects to reduce overall borrowings going forward through
efficient working capital management as well as through stake sale in in Nagpur
real estate project. We thus maintain our estimates and expect net profits to
grow at a CAGR of 10% between FY11-FY13.
Valuation and recommendation
n At current price of Rs 49, stock is trading very attractive valuations of at 3.7x and
3.2x P/E and 3.9x and 3.7x EV/EBITDA multiples for FY12 and FY13 respectively.
n We maintain our estimates and target price for the company. We also don't ascribe
any valuations for the real estate segment due to delays seen in launch of
projects in Bangalore and Kolkata.
n We maintain our price target of Rs 86 on FY12 estimates based on 6.5x FY12
estimated earnings and continue to maintain BUY on the company.
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