Reviews

In this edition, we have reviewed Vascon Engineers Limited and Aptus Value Housing Finance India Limted.. We suggest our reader-investors to HOLD Vascon Engineers Limited and Aptus Value Housing Finance India Limted. 

We had recommended Vascon Engineers Ltd. in Volume 39, Issue No. 2 dated Dec 18, 2023 — Dec 31, 2023, under the ‘Low Price’ segment. The recommended price for the stock was ₹73.15. We had recommended the stock based on its strong financial position, robust order book and solid foundation. Established in 1986, the company has diversified into real estate development with 23 years of experience. With 179 engineering, procurement and construction (EPC) contracts completed, it owns and operates selected projects through subsidiaries. 

In Q4FY24, on a consolidated basis, its revenue increased by 2.47 per cent YoY to ₹335.42 crore compared to ₹327.34 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 19.69 per cent. The PBIDT excluding other income decreased by 64.4 per cent to ₹17.62 crore YoY as compared to ₹49.49 crore from the previous year’s same quarter, while sequentially it decreased by 34.64 per cent. Its net profit stood at ₹16.86 crore compared to ₹45.87 crore, a YoY decrease of 63.24 per cent, while sequentially decreasing by 11.26 per cent from ₹19 crore. 

At TTM, the shares of Vascon Engineers are trading at a PE of 26.8 times, which is higher than its three-year median PE of 14.2 times, whereas the industry PE stands at 40.5 times. If we look at its PBV, it is currently at 1.84 times, which is lower than the industry PBV of 3.57 times. The company has a three-year average return on equity (ROE) of 6.30 per cent and a return on capital employed (ROCE) of 7.30 per cent. It is set to experience a strong year with several positive indicators. The company’s project pipeline is expected to significantly contribute to its performance. The EPC segment has shown consistent growth, with YoY revenue increases of 9 per cent and 14 per cent in Q4FY24. 

Vascon Engineering’s robust order book, valued at ₹3,365 crore, has a significant portion of government projects. The real estate sector is also showing promise, with completed projects and partnerships with leading realtors positioning the company to capitalise on this growing market. Its strong order backlog and healthy financial position provide a solid foundation for future growth, with an ambitious order booking target of ₹1,500 crore by April 2025. The company expects improvements in EBITDA and PBT margins in the next fiscal year, indicating a positive outlook for profitability. 

Hence, we recommend HOLD. 

We had recommended Aptus Value Housing Finance India Ltd. in Volume 39, Issue No. 3 dated Jan 1, 2024 — Jan 14, 2024, under the ‘Cover Story’ segment. The recommended price for the stock was ₹326. We had recommended the stock based on business growth, healthy dividend payout ratio and digital adoption. The company is a retail-focused housing finance company in India, primarily serving low and middle-income self-employed customers in rural and semi-urban markets. The company offers home loans for property purchases, home improvement, extension loans, loans against property and business loans. It has diversified its geographical presence and is focusing on deeper penetration in the existing markets. The company has leveraged technology in various facets of its operations, enabling digitisation of the entire loan lifecycle and increased collection efficiencies. In Q4FY24, on a consolidated basis, its revenue increased by 25.47 per cent YoY to ₹374.54 crore compared to ₹298.51 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 6.58 per cent. The PBIDT excluding other income increased by 27.02 per cent to ₹309.27 crore YoY as compared to ₹243.47 crore from the previous year’s same quarter, while sequentially increasing by 4.92 per cent. 

Its net profit stood at ₹164.03 crore compared to ₹135.3 crore, a YoY increase of 21.24 per cent, while sequentially increasing by 4.09 per cent from ₹157.59 crore. At TTM, the shares of Aptus Value Housing Finance India are trading at a PE of 26.6 times, which is slightly lower than its three-year median PE of 27.1 times, whereas the industry PE stands at 21.4 times. If we look at its PBV, it is currently at 4.34 times, which is higher than the industry PBV of 2.80 times. The company has a three-year average return on equity (ROE) of 16.3 per cent and a return on capital employed (ROCE) of 14.3 per cent. 

The company is focusing on growing disbursements and loan books in housing and small business loans, expanding into existing geographies, and strengthening analytics and digital adoption. It plans to add 35-40 branches in Telangana, Karnataka, Maharashtra and Odisha, with the first branch opened in Maharashtra. The company has declared a dividend of ₹2.50 and plans to maintain a reasonable dividend payout ratio. Its future plans include 30 per cent business growth, maintaining a balanced loan book composition, and increasing leverage to 4-5 times. Hence, we recommend HOLD.