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Showing posts with label Nagarjuna Construction. Show all posts
Showing posts with label Nagarjuna Construction. Show all posts
Sunday, July 01, 2012
Thursday, June 02, 2011
Thursday, October 30, 2008
NTPC, SBI, ICICI Bank, Tata Power, Sun Pharma, Asian Paints, Tata Tea, Tata Communications, M&M Finance, Nagarjuna Constructions, United Breweries
Friday, October 26, 2007
Sunday, September 23, 2007
Nagarjuna Construction: BUY
Investors with a 3-5 year perspective can consider taking exposure to the Nagarjuna Construction stock. Expansion into high margin segments, higher net worth that would help bid for larger sized projects and the traction gained by subsidiaries in the real estate and BOT segments, augur well for the company’s earnings growth. On an expanded equity base (due to shares/warrants to be issued to Blackstone), the current market price discounts expected earnings for FY 2008-09 by 19 times. With the company making headway in the industrial infrastructure space, which offers significant potential, this valuation appears quite reasonable.
The equity overhang that threatened Nagarjuna’s stock has ended after the company announced equity placement to the Blackstone Group. We believe that this infusion of equity would be beneficial over the long term as it would ramp up the net worth and improve the company’s financial qualification to bid for larger orders. The entry of Blackstone may also have benefits for Nagarjuna’s real estate subsidiary, as the private equity player is known to have expressed interest in Indian real estate.
Nagarjuna has made a big leap in the industrial ijnfrastructure space after the recent order win (worth Rs 1,558 crore) of a blast furnace complex in consortium with POSCO E&C. With this, the company is making a transition from being a civil structure contractor to a provider of complete plant works (such as electrical and mechanical works). This move may be margin accretive and takes the company to a less-competitive domain. Nagarjuna’s venture with POSCO E&C to bid for more such projects appears to be a positive as the latter is well placed to provide the necessary technology.
The company also plans to bid for ‘balance of plant’ in power projects, wherein it would provide complete solutions for the unit around the key power technology. Success in bidding for these projects could help it capitalise on the huge capex spending expected in the power sector. The company’s interest costs as a percentage of its sales has seen a 103-basis points increase in the quarter ended June, compared to the previous year. This, combined with the withdrawal of tax benefits under Section 80 IA, has slightly dented net profit margins in the recent quarter. However, a healthy debt service ratio and a waning of the one-time tax effect by FY 2009 are likely to ensure that profit margins recover over the medium term.
Wednesday, August 22, 2007
Tuesday, June 19, 2007
Angel - Nagarjuna Constructions
Angel Broking is bullish on Nagarjuna Construction and has recommended buy rating on the stock with the target price of Rs 201.
Angel Broking report on Nagarjuna Construction:
Investment Arguments
Fast emerging as diversified infrastructure behemoth:
We believe NCC is on track to emerge as a diversified infra heavyweight with about 20% of our sum-of-the-parts (SOTP) valuation coming from SPVs and real estate businesses. We believe NCC's new business model allows it to capitalise on the substantial infrastructure capex of around USD 350 billion mentioned in the XI five-year plan (FY2008-12).
Strong Order Book of 2.5x FY2007 Topline
NCC grew its order book at a strong CAGR of 61% over FY2005-07. The company's order backlog, currently at Rs 7,300 crore, comprises water and irrigation, transportation, buildings, etc. A strong order book gives higher visibility to the company's earnings over the next few years.
Aggressive strategy to bid for high-margin BOT/BOOT projects
BOT projects enjoy an IRR of 14-18%. Currently, BOT projects account for 10% of the total order book of NCC. We have valued NCC’s BOT projects using the DCF method, which works out to Rs 18.7 per share.
Realty to deliver real gains
NCC has total land bank of 529acres. A booming real estate sector is expected to percolate to construction as well, which is the core competency of NCC. We have valued NCC's real estate business at a net asset value (NAV) of Rs 20.6/share.
Valuation
At the CMP, the stock trades at 20.5x FY2008E, 15.9x FY2009E earnings. However, adjusting for the value of the BOT projects (Rs 18.7/share) and Real Estate (Rs 20.6/share), the stock trades at 15.5x FY2008E, 12.0x FY2009E earnings. Based on the SOTP methodology, we have arrived at a Target Price of Rs 201. We initiate coverage on the stock with a Buy recommendation.
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