Recommendation from Infrastructure Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

ITD CEMENTATION INDIA: CREATING NEW MILESTONES

HERE IS WHY
✓ Assured growth prospects in the infrastructure industry
✓ New promoter to add projects in green energy and infrastructure
✓ Impressive order book size

The infrastructure sector is a key driver of the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from the government. In order to meet the country’s aim of reaching a USD 5 trillion economy by 2028-29, infrastructure development is the need of the hour. Keeping in mind the importance of infrastructure for the growth of India, there is an opportunity for those companies engaged in this space.

One such company is ITD Cementation India Ltd. A leading construction company, it is engaged in the business of providing design, engineering, procurement and construction (EPC) services for infrastructure projects in India. It has established its prowess across multiple lines of business, including maritime structure, highways, bridges and flyovers and tunnels, among others. In Q3FY25, on a consolidated basis, the revenue of the company increased by 11.29 per cent YoY to ₹2,244.86 crore compared to ₹2,017.16 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 12.76 per cent. The PBIDT excluding other income remained flat with a slight increase of 0.62 per cent to ₹206.06 crore YoY as compared to ₹204.8 crore from the previous year’s same quarter. Its net profit stood at ₹86.73 crore compared to ₹75.85 crore, a YoY increase of 14.34 per cent, while sequentially it increased by 20.24 per cent from ₹72.13 crore.

As of December 2024, the company’s order book stands at ₹19,893 crore. The clientele comprises of the government (50 per cent), PSUs (8 per cent) and the private sector (42 per cent). The company’s order book is distributed across various sectors, with maritime structures holding the largest share at 36.1 per cent. Industrial structures and buildings account for 23.3 per cent, followed by urban infrastructure, MRTS and airports at 15.8 per cent. Highway, bridges and flyovers contribute 10.3 per cent, while hydro, dams, tunnels and irrigation make up 8.7 per cent.

The company’s current execution capabilities support operations up to ₹10,000 crore with potential to increase it to ₹13,000-14,000 crore with additional capex and manpower. It is focusing on technological advancements, including the use of larger cranes and piles to enhance operational efficiency. The management has maintained a long-term revenue growth guidance of 20-25 per cent annually. Its new promoter, the Adani Group, is expected to bring in additional opportunities and investments, particularly in green energy and infrastructure sectors. Adani Group’s Renew Exim DMCC is set to acquire a majority stake worth ₹5,757 crore in ITD Cementation India.

On the valuation front, the shares of the company are trading at a PE of 27.2 times, which is higher than the industry PE of 18.1 times and its three-year median PE of 25.4 times. Its annualised sales growth for three years stands at 41.4 per cent, while the profit growth for three years stands at 170 per cent. Amidst the current market volatility, ITD Cementation India has maintained its position and is trading near its 50 DMA. Considering the sector’s growth potential, ITD Cementation India’s business and order book potential and the company’s operational efficiency, we recommend BUY.