Recommendation from Construction - Infrastructure

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

MAN INFRA CONSTRUCTION: BUILDING A PROFITABLE FUTURE

HERE IS WHY
✓Strong order book
✓Established brand visibility
✓Robust balance-sheet

The Union Budget 2023 has come across as growthoriented and the focus continues to be on increasing the capex in infrastructure to spur growth. The capital investment outlay for FY 2024 has been increased steeply for the third year in a row by 33 per cent to ₹10 lakh crore, which is around 3.3 per cent of the GDP. This will be almost three times the outlay in FY 2019-20. Owing to the number of opportunities in the infrastructure space, our low price recommendation for this issue is Man Infraconstruction. Incorporated in 2002, Man Infraconstruction (MICL) is an integrated engineering, procurement and construction (EPC) company

It has experience and execution capabilities in port, residential, commercial and industrial and road construction segments. The company has two business verticals, EPC and real estate development. For the period ending 9MFY23, 57 per cent of the revenue was derived from real estate while the remaining 43 per cent came from the EPC segment. The company has strong execution capabilities and has completed 10 real estate projects, all before time, out of which nine projects were under the brand name ‘Aaradhya’ and one project under ‘Atmosphere’.

All the projects are located in Mumbai. The company has six ongoing residential projects and two commercial projects with two upcoming projects in Mumbai and MMR region. Till date, the company has executed construction of about more than 25 million sq. feet of residential and commercial buildings and seven ports amounting to 700+ hectares in India. The company in the first nine months of this fiscal has sold around 2.65 million sq. feet of carpet area with a cumulative sales value of over ₹5,750 crore. Its new launches account for approximately 7.22 lakh sq. feet in Mumbai, of which around 40 per cent (1 lakh sq. feet) of the project ‘Aaradhya Parkwood’ was already sold out within 15 days of its launch in the month of December. 

The current order book of the company stands at 1.4 times its FY22 revenue, demonstrating visibility in the revenue over the medium term. In Q3FY23, MICL reported strong quarterly performance. The company’s top-line grew by 54.07 per cent YoY to ₹456.86 crore compared to ₹296.52 crore from the previous year’s same quarter. Growth was primarily driven by the EPC segment that contributed 55 per cent of its revenue. Net profit jumped 126.36 per cent YoY to ₹90.61 crore from ₹40.03 crore. Operating margin jumped by 1,320 bps YoY and 480 bps QoQ and stood at 28.2 per cent. Its PAT margin grew by 633 bps YoY and 412 bps QoQ and stood at 19.8 per cent. The company’s EPC order book as of Q3FY23 stands at more than ₹1,325 crore. 

Out of the total order book, the infrastructure segment contributes around 87 per cent while the residential segment contributes the rest. At TTM, shares of MICL are trading at a PE of 14.1 times, which is below its three-year median PE of 25 times. The company also looks undervalued compared to its peers with industry PE of 37.9 times. The company has a PEG ratio of 0.41 times and is trading at 3.1 times its book value. It has a robust balance-sheet with interest coverage of 7.11 times over its debt to equity of 0.65 times. With a well-diversified portfolio of ongoing projects, the company has strong order book position and robust balance-sheet and is available at attractive valuation. Considering these factors, we recommend BUY.