Hindustan Constrution Company executes large infrastructure projects and has expertise to develop projects across the infrastructure spectrum. Its has expertise in water supply and irrigation, marine works, piling works, nuclear projects, hydel projects, transportation, earthworks/embankments, thermal projects, industrial structures, environmental engineering and other miscellaneous works. It is actively focused on roads (including bridges) and power (Nuclear, Thermal and Hydel). Both of these segments as well as others offer solid growth prospects.
Its turnover in Q3FY09 went up by 16.3% to Rs.876 cr. as compared to Q3FY08. EBIDTA increased by 9.5% to Rs.106 cr. during Q3FY09. However, higher interest cost of Rs.57.3 cr. due the unprecedented liquidity crisis in the industry coupled with a forex loss of Rs.6.8 cr. resulted in a 7% fall in net profit to Rs.23.2 cr. during Q3FY09 as compared to Q3FY08.
For the nine-month period ended 31 December 2008, the turnover of the company increased by 21.4% to Rs.2,468.5 cr. as compared to the corresponding period last year. The EBIDTA increased by 19.3% to Rs.280.8 cr. but net profit fell by 10% to Rs.73.99 cr. due to increased interest cost and forex losses.
During the previous quarter, 7 orders worth Rs.4,404 cr. were received taking its order book to Rs.12,177 cr. as on 31 December 2008. 39% of the order comprises are power projects, 40% were water projects whereas 19% of the total order book were transport projects. The company believes that despite the slowdown in the economy, the infrastructure spend of the government will continue as a contra cyclical measure to battle the recessionary trends in the economy.
The company is awaiting new contracts worth Rs.5,000 cr., where it was the lowest bidder. Over and above these, it has tenders worth Rs.30,098 cr. under evaluation. This way, the total order book by 31 March 2009 may swell up to Rs.17,000 cr.
The Bandra-Worli sea link would be completed by 31 March 2009 provided support from MSRDC (Maharashtra State Road Development Corporation) is received and the Maharashtra Government would inaugurate the link on Maharashtra Day i.e. 1 May 2009.
Lavasa, the country’s first and largest hill station being developed by HCC Real Estate Ltd., would open its first phase for occupation in October 2009. Around 1,400 apartments and villas are already sold out. The rate of the villas are around Rs.3,550 per sq. ft. whereas flats are sold around Rs.3,050 per sq. ft. Around 22,500 sq. ft of retail space is already leased out at an average lease rental of Rs.75-80 per sq. ft.
The management expects that there would be a permanent student base of 10,000 in Lavasa.
The construction of 247 Park in Vikhroli-West (Mumbai) by HCC Real Estate Ltd. would be completed by 31 March 2009. The company has already achieved 50% pre leasing for 247 Park.
Total debt in the company’s book is around Rs.2,500 cr.; Net working capital is around Rs.1,000 cr. whereas cash is around Rs.70 cr.
For FY09, it expects 20-30% higher topline as compared to the previous year. The EBIDTA margin would be maintained. However, interest cost would be high due to the tight liquidity situation.
Seeing to the expected strong growth in areas where the company operates, its long-term outlook is encouraging. Investors can accumulate this stock on dips for good long-term growth.
At present, the stock is trading at Rs.30, which is almost a 5-year low when the Sensex was around 5000 level. Its book value is around Rs.40 while its all time high is around Rs.270 level. Thus stock has a limited down side.
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