Core Projects and Technologies

Prabhudas Lilladher has initiated coverage on Core Projects and Technologies Ltd with a ‘buy’ for a target of Rs 290.

Core Projects has witnessed tremendous growth in the last two years. Revenue increased 130 per cent to Rs 199.70 crore in 2006-07 (Apr-Mar) from Rs 86.70 crore in the pervious year. Net profit grew 215 per cent to Rs 33.40 crore from Rs 10.60 crore in 2005-06. The company acquired five companies which contributed 65 per cent to topline and bottom line in 2006-07.

Prabhudas Lilladher expects Core's revenue and earnings to grow at compounded annual growth rate of 87.4 per cent and 60.6 per cent respectively over 2007-08 and 2009-10. The growth will be fuelled by the huge domestic education infrastructure opportunity, Core’s recent tie-up with Centre of Higher Learning of US, inorganic growth and cross selling of products of recently acquired companies.

In a report dated Nov 5, the brokerage gives a multiple of 13 times to its 2009-10 earning per share of Rs 19 from its on-going business, which gives a per share value of Rs 246 to its IT business. On the other hand, the brokerage have given a multiple of 2 times to its NPV from the BOT project, which gives a per share value of Rs 44. The combined per share value comes to Rs 290, leaving an upside potential of 27.8 per cent from the current levels.

Core Projects has entered into a joint venture with IETS subsidiary of IL&FS to provide IT and infrastructure solution in the education space. The JV is expected to set up complete infrastructure for schools. It will also install and implement a comprehensive MIS that can be used by central government, state government, school administrators, teachers and students to monitor the progress and benefits under SSA dispensation.

The company will set up 175 centres during three years, which will fetch it one-time revenue of Rs 2.80 crore per centre. These centres will be set up for IL&FS and IGNOU and will be operated by the JV between Core and IL&FS. The JV will earn annual revenue of $1.3 million from each centre