Recommendation From Construction & Engineering Sector

Atlanta

BUILD ON SUPER HIGHWAY

HERE IS WHY
Rs.1292 crore road project in Gujarat from the NHAI
Positive ques from Micro economic environment
Strong financial performance

India's infrastructure sector’s capital expenditure in FY18 is budgeted to increase 10.7 per cent at Rs.396135 crore. As much as Rs.64900 crore has been budgeted for roads that include construction budgets for highways, rural and coastal roads. Government’s stance on developmental strategy will benefit companies like Atlanta. There have been though anticipations over impact on construction and engineering sector due to demonetisation drive.

There may be short term pain but we can see gain in long-term also. Atlanta is in the business of contracting activities, such as construction and development of infrastructure. The company is involved in the business of infrastructure development on engineering, procurement and construction (EPC) basis and public private partnership (PPP) model on build, operate and transfer (BOT) and design, build, finance, operate and transfer (DBFOT) basis.

Atlanta is developing a tourism project spread over 4000 acres of land with approximately eight kilometre waterfront, near Surat. Its infrastructure development activities include, construction of roads, highways, bridges and runways on BOT and DBFOT basis. The company is also involved in real estate development, tourism, infrastructure business segment and mining of coal and lime stones. Atlanta has secured Rs.1292-crore worth road project in Gujarat from the National Highways Authority of India (NHAI).

The company will work on six-laning of road from 401.2 km to 494.41 km of NH-8 in Gujarat in hybrid annuity mode under NHDP Phase V from the NHAI. On financial front, Atlanta’s revenue boosted almost three folds to Rs.148 crore in 9MFY17 as compared to the same period in the previous financial year. The company’s EBITDA too rose tremendously from Rs.13.33 crore in 9MFY16 to Rs.96.2 crore in 9MFY17. 

It has witnessed turn around in profitability and posted net profit of Rs.60.86 crore in 9MFY17 against net loss of Rs.9.81 crore in 9MFY16. On TTM basis, Atlanta’s top line decreased 14.58 per cent to Rs.231 crore at the end of December, 2016. The company’s EBITDA increased more than three and half times to Rs.119 crore in December, 2016. It posted net profit of Rs.74 crore in December 2016 against net loss of Rs.5.25 crore in December 2015. Atlanata has total debt to equity at 2.4x in FY16.

The company’s interest coverage ratio stands at 0.14x in FY16. On valuation front, Atlanata’s PB ratio is pegged at 1.74x against peers such as NELCO (13.05x), Brahmaputra Infra (0.63x), Noida Toll Bridge (0.51x). The company has latest book value of Rs.48.4. Due to negative TTM EPS, we can’t evaluate PE ratio for the company. At the same time industry PE of 19.19x. On astonishing financial performance in FY17 till date and bagging new orders from NHAI, we recommend our reader-investors to BUY the stock.