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Strong show; outlook remains positive
Capcit’e Infraprojects Ltd. (Capacit’e) reported its Q4FY19 numbers which were marginally ahead of our estimates. The revenue growth was strong at 30.6% YoY led by robust execution. However, margins came in tad lower than our estimates at 13.5% (v/s our estimate of 14%) mainly due to increase in construction and other expense. Consequently, EBITDA growth was restricted to 7.3% YoY in Q4FY19. Led by lower depreciation cost and lower tax expense, PAT grew by 15.9% YoY (marginally ahead of our estimates). Going forward, we continue to remain positive on Capacit’e long term growth prospects given its robust order book, strong execution capabilities and healthy balance sheet. Given its strong performance in FY19, we have raised our estimates higher for FY20E and FY21E and have a revised target price of Rs. 295. Q4FY19 Result Update:
* Standalone net revenue grew by 30.6% YoY to Rs. 497.6 cr (ahead of our estimates) led by robust execution. On a sequential basis as well the company registered a healthy revenue growth of 10.7%. Despite challenging environment for the overall real estate sector in FY19, Capacit’e has managed to deliver a stellar growth of 33.8% led by its robust order book and strong execution capabilities.
* The operating margin came in marginally lower than our estimates at 13.5%. The contraction in margin was mainly led by increase in construction and other expense. Going forward, we expect margins to improve gradually. Further, Led by lower depreciation cost and lower tax expense, PAT grew by 15.9% YoY to Rs. 25.9 cr (marginally ahead of our estimates).
* Other key highlights:
i) Capacit’e received orders worth Rs. 3,629 cr in FY19 taking its total order book to Rs. 7,177 cr and MHADA order book of Rs. 4,357 cr, ii) the company foreclosed two projects worth ~Rs. 300 cr which has resulted in a marginal decline in total order book on a sequential basis, iii) the company has been constantly improving its client quality by adding marquee names in the clientele and the top 10 client group comprises of 75% of the total order book, iv) the total collections in FY19 was at Rs. 1,745 cr.
Outlook & Valuation:
Capacit’e is a fast growing construction company with primary focus on construction of Residential, Commercial and Institutional buildings. We believe the company is well placed to benefit from increase in government spending in affordable housing space, increase in urbanization, rising income levels and nuclearization of families. With healthy order book (Rs. 7,177 cr) and strong execution capabilities, the company is likely to witness robust growth over the next 1-2 years. In addition, Capacit’e has been increasing its market share amongst Tier-1 developers which have seen robust growth over the past few years. On the operational front, post a subdued year in FY19, we expect gradual improvement in margins going forward. Hence, we have raised our estimates for FY20E and FY21E and expect Revenue/ EBITDA/PAT to grow at 19%/20.3%/22.3% CAGR over FY19-21E. We maintain a Buy on the stock with revised target price of Rs. 295.
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