Unity Infraprojects (UIP) is one of the fastest growing mid-cap company in the
infrastructure space with focus on civil construction segment (residential,
commercial and industrial structure portfolio) and infrastructure projects in
irrigation & water and transportation segments. The company has a healthy order
book of `4,495cr as of 2QFY2013. Given the strong bid pipeline and L1 status
for projects worth `1,400cr, we estimate UIP to report a revenue CAGR of 11.5%
over FY2012-FY2014E. Its focus on high growth buildings and water/irrigation
segment provides confidence on future growth. We initiate coverage with a Buy
rating and a SOTP target price of `59.
Comfortable order book-to-sales provides revenue visibility: The company’s order
book stands at `4,495cr (excluding L1 orders worth `1,400cr) as on 2QFY2013,
thereby translating into a book-to-bill ratio of 2.2x trailing revenues. This gives a
comfortable revenue visibility for the next two years given the short execution
period of 24-30 months. The order book mix comprises of projects in the civil
(52%), irrigation & WS (21%) and transportation (27%) segments.
Well diversified order book with pan - India presence: UIP initially started off with
a presence in Maharashtra and historically remained skewed towards projects in
and around Maharashtra. It has come a long way in the last decade, making
its presence felt across India by diversifying into new verticals and bidding for new
projects across the country. As on 30th September 2012, 59.1% of UIP’s order
book catered to the North, South and East regions of the country.
Foray into asset ownership model: From being a mere EPC player, UIP has forayed
into asset ownership model through its wholly owned subsidiary Unity Infrastructure
Assets Ltd and has bagged 3 BOT projects under its portfolio. The company has
started construction activity in one of its road BOT project – the Chomu-Mahla project
and is in an advanced stage of achieving financial closure for the other two projects.
Valuation & recommendation: On the back of healthy order book and growth
potential, we believe the company would clock revenue CAGR of 11.5% over
FY2012-2014E. The stock is currently trading at a P/E of 3.5x and 3.1x our FY2013
and FY2014 diluted earnings estimates. We have used sum-of-the-parts (SOTP)
method to value the stock. We value the construction business at a P/E of 3.5x
FY2014E earnings (~30% discount to larger companies under coverage) and UIP’s
BOT projects on a DCF basis at a CoE of 16%. We initiate coverage on the stock
with a Buy rating and target price of `59, indicating an upside of 27%.
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