Recommendation from Construction - Infrastructure Sector

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 : MOVING TO GREATER HEIGHTS

HERE IS WHY
✓Reputed for quality and timely delivery of projects
✓Government’s focus on infrastructure development to boost orders
✓Developing residential projects with huge revenue potential

India’s growth in 2023 and beyond will largely be driven by infrastructure development, which is crucial for becoming a USD 5 trillion economy by 2025. The government has launched the National Infrastructure Pipeline (NIP) and initiatives like Make in India and Production-Linked Incentive (PLI) scheme to boost GDP growth. The focus is on improving delivery across housing, water, sanitation, digital and transportation sectors for economic growth and improved quality of life. 

The Indian Union Budget 2023-24 aims to increase infrastructure capital investment by 33 per cent to ₹10 lakh crore (USD 122 billion), equivalent to 3.3 per cent of GDP. Taking all this into account, our low-price scrip for this issue is Man Infra Construction Limited (MICL), which is a 59-year-old engineering, procurement and construction (EPC) company with expertise in various construction sectors, including ports, residential, commercial and industrial and roads.

The company is known for its quality construction and timely project delivery. It operates in two business verticals: construction and real estate development. In the construction vertical, MICL offers design, procurement and construction services in ports, residential, commercial, industrial, and road sectors. In the real estate development vertical, MICL has developed numerous residential projects in Mumbai, showcasing its superior quality and timely delivery.

In Q1FY24, the revenue of the company stood at ₹509.66 crore, which is 45 per cent higher on a YoY basis. However, it has declined 25 per cent on a QoQ basis. The company’s PBIDT excluding other income stood at ₹109.08 crore, which increased by 63.47 per cent, while on QoQ basis it declined by 12 per cent. The PBIDTM excluding other income was 21.40 per cent which was 18.96 per cent during Q1FY23. The company’s profit after tax (PAT) witnessed a substantial growth of 94.3 per cent on a YoY basis which stood at ₹84.80 crore. In summary, the company demonstrated strong YoY growth.

Additionally, its PAT witnessed a slight QoQ decline but significant YoY growth. At TTM, MICL is trading at a PE of 17.9 times, which is slightly lower than its three-year median PE. It has maintained a three-year ROE and ROCE of 20.7 per cent and 25.7 per cent, respectively. It has a three-year compounded sales and profit growth of 92 per cent and 238 per cent, respectively. The company has a debt-toequity ratio of 0.19 times and an interest coverage ratio of 9.52 times. MICL Group has completed approximately seven ports across India. Recently, the company secured a large port order worth ₹680 crore from BMCT.

The company also announced an ultra-luxurious residential project in Ghatkopar East, Mumbai, with a saleable carpet area of around 4 lakh square feet. The project is expected to generate revenue of around ₹1,200 crore over the next four years. MICL is also working on US projects, including ‘Urbin’ at Miami Beach and ‘Ponce’ at Coral Gables. A redevelopment project in Mumbai’s western suburbs has the potential to generate revenue of ₹4,000 crore in the coming five years. The company is focused on reducing debt, improving liquidity and delivering quality and timely projects, resulting in repeat business from existing clients. Considering all these factors, we recommend BUY.