Recommendation from Real Estate Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.[EasyDNNnews:PaidContentStart]

Vascon Engineers : BUILDING GROWTH ON SOLID FOUNDATIONS

HERE IS WHY
✓ Robust EPC Order Book
✓ Asset-Light Real Estate Growth
✓ Attractive Valuations

India’s Construction and real estate sectors are entering a multi-year growth cycle, backed by government spending and housing demand. The EPC sector, contributing nearly 8 per cent to GDP, grew 12–15 per cent in FY25 and is projected to expand 6–8 per cent in FY26. Flagship programmes such as PM Gati Shakti, Bharatmala, Smart Cities Mission, and PMAY-U ensure long-term visibility. Real estate demand is also strengthening, with the sector expected to grow at a 13–15 per cent CAGR over the medium term, driven by urbanisation and rising incomes.

In this backdrop, Pune-based Vascon Engineers Limited (est. 1986) has positioned itself as a diversified EPC and real estate player. With nearly four decades of experience and 225+ projects covering 45 million sq. ft., Vascon has built a strong reputation across residential, commercial, industrial, and institutional verticals. Its EPC arm remains the growth engine, while real estate operations follow an asset-light JV and redevelopment model, limiting capital intensity.

The EPC division delivered ₹1,007 crore in FY25 revenue, aided by robust execution in healthcare, residential, and institutional projects. As of June 2025, the order book stood at ₹2,902 crore (around 3x FY25 EPC revenue), with nearly 73 per cent from governmentbacked contracts, ensuring visibility and steady cash flows.

Management is guiding for 20–25 per cent EPC revenue growth annually, targeting ₹1,200 crore in FY26 and doubling EPC revenue to ₹2,000 crore in four years. Focus has shifted to larger ₹600–700 crore contracts, supporting margin expansion. A five-year MoU with Adani Infra could be transformational, expected to contribute 30 per cent of turnover. Three large Mumbai projects (13.15 million sq. ft.) have already been identified under this partnership

Though smaller in scale, real estate is entering an acceleration phase. FY25 revenue from the segment was ₹71 crore, aided by Tulip Phase III, Tower of Ascend, and Orchids. A launch pipeline of ~0.82 million sq. ft. across Mumbai and Pune has sales potential of ₹1,100 crore, with realisable revenue of ₹1,500 crore (Vascon’s share) over four years. Key triggers include ₹175–200 crore revenue recognition in FY26 from Tower of Ascend and Coimbatore projects, and ~₹300 crore of unrecognised revenue from ongoing developments.

FY25 was a landmark year: revenue rose 41 per cent YoY to ₹1,077 crore, EBITDA stood at ₹100 crore with EPC margins at 10–11 per cent, and PAT nearly doubled to ₹130.25 crore. In Q1 FY26, revenue grew 13 per cent YoY to ₹220.91 crore, EBITDA surged 91 per cent YoY to ₹33.54 crore (₹16 crore adjusted), and PAT doubled to ₹22.47 crore. The balance sheet remains strong with low leverage (D/E 0.19x) and interest coverage at 5.6x.

At 19.5x P/E, Vascon trades at a steep discount to the industry average of ~41x, offering valuation comfort. While return ratios are modest (ROE 6.3 per cent, ROCE 7.8 per cent), operating leverage from a growing order book, highermargin contracts, and upcoming real estate recognitions should drive improvement. The Adani Infra partnership further enhances visibility and derisks inflows. Vascon combines the stability of a large EPC order book with the optionality of real estate growth through an asset-light strategy. With strong revenue visibility, upcoming launches, and attractive valuations, the company is well-positioned for sustained growth. Despite modest return ratios, structural strengths outweigh risks.

We recommend a BUY.

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