Heavy monsoon impacts execution
Capacite Infraprojects Ltd (CIL) reported weak performance during Q2 FY20 with topline de-growing 8.5% yoy (to Rs.4.1bn). The execution was severely impacted by heavy monsoon which led to execution shut down for ~29 days. However, its operating margin improved 198 bps yoy (to ~16.6%). Favorable taxation saw bottom-line witnessing whopping 73% yoy growth in net profit. During Q2 FY20, CIL secured major order from CIDCO (worth Rs.45bn) and order book now stands at a whopping ~Rs.111bn (excluding MHADA order). Going forward, with the large order book in-hand and liquidity issues in the real estate space, CIL is likely to be very selective in bidding for new projects. It expects execution to pick up in the H2 FY20 and margins to sustain at ~15% levels over FY20 and FY21. The revenue contribution from CIDCO is expected to meaningfully contribute from FY21 onwards. We expect CIL to clock topline and PAT CAGR of 25% and 40% respectively over FY19-21E with operating margin at ~15%. We maintain BUY rating on the stock for target price of Rs.338.
CIDCO order pumps up order book; CIL to be very selective in considering new projects
The recent CIDCO order has changed the dynamics for CIL in terms of order book. With such a large order in its kitty, CIL is now very well placed and can we very selective in considering new orders. We believe the robust order backlog now provides significant growth visibility for next few years. The lean balance sheet and strong execution capabilities would support execution
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