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Strong order book offers visibility on topline

ITD Cementation India (ITDC) possesses core competency in areas like construction of metro, marine structure etc. which are complex projects. The government has been focusing on spending on infrastructure projects which augurs well for the company. The company has an order book of ~Rs.16,000 cr as of February 2022, which provides revenue visibility for the next ~3 -4 years.

Strong prequalification in some segments

The company has built strong pre-qualification due to strong parentage in segments like metro construction and marine. The parent company has executed many rail and metro projects in the past. ITDC has entered into JV with its parent for some of the major projects for execution.

Strong earnings trajectory, 24% earnings CAGR over FY20-24E

Driven by further improvement in the operational efficiencies and execution of non-profitable legacy projects, management is confident of achieving double-digit margins in FY23E. With the order book at the all-time high and execution of projects picking up pace, we expect sales to grow at a CAGR of 11.7% over FY20-23E. Better operating performance and low gearing would help the company to improve its return ratios. We expect ROCE to increase from 7.9% in FY21 to 14.0% in FY24E.

OUTLOOK & VALUATION

We forecast ITDC’s revenue/PAT to grow at 11.7%/24.2% CAGR over FY20-24E. Going forward, we expect the company to deliver an EPS of Rs.6.1 in FY24E; assigning a target multiple of 15x, we arrive at a target price of Rs.91, showcasing an upside potential of 34% from current levels with an investment horizon of 18- 24 months. We recommend a BUY at current levels.

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