MBL INFRASTRUCTURES LTD - INCREDIBLE … intensity continues, this would create bright prospects for...
Transcript of MBL INFRASTRUCTURES LTD - INCREDIBLE … intensity continues, this would create bright prospects for...
MBL INFRASTRUCTURES LTD BUY
REPORT ON MBL INFRA
We initiate a buy cal on the stock with a target price of INR 270 for an investment horizon of one year
MBL INFRASTRUCTURES LTD
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TABLE OF CONTENT
CONTENT
1. COMPANY PROFILE
2. VALUATION & EARNINGS ESTIMATE
3. INDUSTRY OVERVIEW
4. COMPANY DESCRIPTION
5. MANAGEMENT
6. KEY INITIATIVES
7. RESULT ANALYSIS
8. RISK ASSOCIATED
9. PEER GROUP COMPARISON
10. CHARTS & GRAPHS
11. OUTLOOK & CONCLUSION
MBL INFRASTRUCTURES LTD
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MBL Infrastructures Ltd is a Delhi based Engineering Procurement
and Construction (EPC) company focusing primarily on five sectors
namely, Highway Construction, Road Maintenance, Industrial
Infrastructure Projects, Other Civil Engineering Projects and BOT
Projects. MBLIL is an integrated player with its own ready mix
concrete (RMC) and bitumen plants and stone quarries/mining.
Apart from catering to captive needs, the RMC and quarry divisions
of the company supplies surplus production to third parties. The
company is currently executing 14 projects simultaneously. Their
clients include various government bodies and other private sector
bodies.
VALUATION
Outlook & Valuation Summary
In view of strong order book, efficient execution of ongoing
projects and improving track record, we expect the company’s top
line to grow at a healthy rate of 40% and 30%for FY11E and
FY12E to Rs 8.8 bn and 11.5bn.The company is well poised to
capitalise on the opportunities and grow faster than its peers.MBL
trades at a P/E of 5.29X and 4.07X FY11E and FY12E earnings
which we think is available at a steep discount to its peers
considering its high growth rate and healthy return ratios. Since the
stock offers good opportunity, we initiate a “buy” call on the stock
with a target price of Rs 270 an upside of 68% from the present
levels.
EARNINGS ESTIMATES:
Outlook:
FY08 FY09 FY10 FY11E FY12E
SALES (mn) 2963 5138 6331 8863 11522
PAT (m) 169 274 370 532 691
NPM (%) 5.71 5.33 5.84 6 6
EPS 14.3 23.3 28.1 30.37 39.48
Date:21 th MAY 2011
CMP = 160.70
TARGET PRICE= 270
BSE Code 533152
NSE Code MBLINFRA
Market Cap (Rs Cr) 283.2
52 Week High/Low 292.85/160.05
Face Value Rs10.00
Shares O/S (MN) 17.51
P/E 5.23
INDUSTRY P/E 13.13
INDUSTRY constructing &contracting-
civil
Research Analyst:
Tanvi Sharma
Prmotor
58%
FII4%
DII13%
Others
25%
Share Holding Pattern
Mbl Infrastructures
ltd BUY
b
BUY
MBL INFRASTRUCTURES LTD
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. MBLIL’s current stand alone order book stands at approx. `1, 6000 mn in about in 8 states of
the country which stands at ~2.5x FY10 sales, will be the main revenue driver for the next two
years. The company’s closing order book to grow at a CAGR of 29% during FY10A to FY13E.
The company has invested in developing its own modern construction equipment & machinery
and has also built a strong and technically experienced work force. It owns an entire range of
state of the art road construction machinery which is enough to meet the present and future
requirements. The company currently owns 114 km toll road project in Madhya Pradesh and
recently it has bagged a 96 km BOT project for Rs. 8150 mn from NHAI in Orissa .The JV
orders together make other `11950 mn. The order book will grow because of government’s
concentration on road development and company’s impressive execution track record. The debt
to equity ratio of 0.9x as end of FY10 gives company an advantage of low leverage which will
enable it to raise adequate capital through debt funding without going for equity dilution.
INDUSTRY SNAPSHOT As per the Union Budget 2010-11, allocation for infrastructure projects for the ensuing fiscal is
`2, 14,000 crore ($47.5 billion) since good roads, ports and railways are essential to sustain
growth. In the next Five Year Plan (2012-17),India will need double the investment of $500
billion that will go into infrastructure development in current plan period.Preliminary exercises
suggest investment in infrastructure will have to expand to $1 trillion in the 12th Five Year Plan.
The envisaged 12th plan spend is more than the cumulative spend over the last 4 five year plan
periods which strengthens outlook for the sector. India will require US$70bn of investment over
the next three years to build 20 km of road per day to ensure future growth. Out of the USD70bn,
60% (Rs. 42bn) will be raised by the private sector. The share of private investment in
infrastructure would have to increase from Rs. 1,721.9bn during the 10th plan to a whopping Rs.
6,195.9bn during the 11th plan. Ministry of Rural Development (MoRD) plans to construct
129,707 Kms of new rural roads and upgrade 100,740 Kms of existing rural roads in the 11th
Five Year plan. Again, bulk of the planned spend is directed towards roads, ports, power and
urban infrastructure segments. With no change in sectoral allocation and with an average
construction intensity continues, this would create bright prospects for the construction industry.
COMPANY DESCRIPTION ⇒ MBL Infrastructures Ltd was incorporated on august 25, 1995 with the name Maheshwari
Brothers Ltd. The company commenced their business on September 12, 1995.In the year 1996,
the company took over Maheshwari Brothers, a partnership firm engaged in the business of
trading in steel and waste management at steel plants. MBL Infrastructures Ltd is a Delhi based
Engineering Procurement and Construction (EPC) company. The company focuses on five
sectors namely,Highway Construction, Road Maintenance, Industrial Infrastructure Projects,
Other Civil Engineering Projects and BOT Projects. The company has a pan India presence.
They have executed and undertaken a number of projects in the states of West Bengal, Madhya
Pradesh, Uttarakhand,Orissa, Maharashtra, Rajasthan, Assam, Uttar Pradesh, Bihar, Delhi,
Andhra Pradesh, Chhattisgarh, Jharkhand, Haryana and Karnataka. Their clients include NHAI,
MPRDC, SAIL, MMRDA,CPWD and State PWDs and currently executing 14 projects
MBL INFRASTRUCTURES LTD
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IPO in 2009
Of
57 lakhs shares was
1.97 times subscribed
simultaneously. The company has over a period of time established in the construction segment
and has become a established player in the road construction segment. The company bids mainly
for NHAI and select state projects funded by World Bank or Asian Development Bank which
ensures timely payments and better margins. It is commendable that the company has always
completed its projects on time.
MANAGEMENT
Experienced Management
The company has experienced and young team of management which will help the company to
Grow on a faster pace. They have entered into various strategic tie ups to execute and bid
projects of bigger seize there by mitigating their project risks. As
per the management guidance and they are looking out
for option into urban infrastructure and water & water
waste management projects. The key
personnel details are given as under
Name & Designation Brief Profile
Anjanee Kumar Lakhotia, CEO & Chartered Accountant. Has been director with the company
Whole Time Director since inception and has over 10 years of experience in
infrastructure development
Maruti Maheshwari, Executive Commerce Graduate. Joined the company in 1996 and has
Director over 10 years experience in infrastructure development
Surinder Singh Kohli, Independent 65 years old; Ex-Chairman of India Infrastructure Finance Company
Director Limited, Punjab National Bank and Punjab & Sind Bank
Ashwini kumar Singh, Independent 66 years old; Electrical Engineer; Part of SAIL senior management
Director for more than 20 yrs Presently resident director of Essar Steel Ltd.
Kumar Singh Baghel, Independent
68 years old; M.A. (English) & CAIIB; Worked
with
Director State Bank of Bikaner & Jaipur for over 34 years
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KEY INITIATIVES In house execution capability
The company has invested in developing its own modern construction equipment & machinery and has
also built a strong and technically experienced work of more than 600 employees which
will lead to on-time execution of projects. It owns an entire range of state of the art road construction
machinery which is enough to meet the present and future requirements. Backward integration has helped
in rapid mobilization at multiple location and given an edge over peers
Margins protected because of Escalation clause
To protect its operating margins the company tries to mitigate the risk by including the escalation
Clause thereby protecting itself form rise in prices. As informed by the management almost 99% of the
order book is protected by the escalation clause
Adoption of Asset light model
The company has adopted asset light model wherein the company targets specific high potential
projects across the EPC and BOT segment. The strategy is to go for selective bidding of projects
in Joint Ventures (JV) or bid it on their own. This model not only enables the company to execute big size
projects by mitigating the risk through JV route but also facilitates to have pan–India presence. Thus, de-
risking its business model.
Low Debt to Equity ratio ensures future growth without equity dilution
The debt to equity ratio of the company stands at 0.86x as end of FY10. This gives company an
Advantage of low leverage which will enable it to raise adequate capital through debt funding without
going for equity dilution. Going forward we expect it to remain at 1.4x by FY13E.
Early Mover in the segment
The come had a early mover advantage as it was among the first batch of contractors to be
Awarded the contracts to build the prestigious North South East West corridor by NHAI and it was The
first contractor to complete this project. They were the first to be awarded the comprehensive
Maintenance of Ring Road and Outer Ring road, the most important corridors of Delhi
Joint Venture route will enhance the company’s capacity to bid and improve technical pre-
qualification
The company has entered into specific JV’s with localised players to execute various key and high value
projects. It has helped the company to enhance it’s capacity to bid and improve it’s technical pre-
qualification thereby mitigating the project risk. Such strategy will help the company to bag more high
value projects in the future and grow it’s order book. 42% of the total order book consists of orders won
via the JV route
Exploring other opportunities The company has ventured itself into urban infrastructure for constructing 4 multi storey buildings.The
project is for civil works in the campus of Rajiv Gandhi Thermal Power Project , a profitable central
government organization at Hisar Dist. The cost of projects is for Rs. 314.88 mn. This will
give the company a first hand experience into such business and a diverse opportunity to venture
into urban infrastructure projects going ahead.
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RESULT ANALYSIS
PROFIT &LOSS STATEMENT in Rs
Cr
Particulars Mar-10 Mar-09 Mar-08 Mar-07
No of Months 12 12 12 12
Gross Sales 6288.83 5058.42 2918.06 1693.15
Less :Inter divisional transfers 0 0 0 0
Less: Sales Returns 0 0 0 0
Less: Excise 0 0 0 0
Net Sales 6288.83 5058.42 2918.06 1693.15
EXPENDITURE :
Increase/Decrease in Stock 38.61 -1.84 -23.59 22.36
Raw Materials Consumed 2595.38 2542.73 1327.79 765.79
Power & Fuel Cost 229.55 101.7 97.11 37.27
Employee Cost 102.12 67.93 52.8 30.52
Other Manufacturing Expenses 2328.51 1556.95 1014.48 548.38
General and Administration Expenses 96.38 73.22 66.06 55.53
Selling and Distribution Expenses 0 0 0 0
Miscellaneous Expenses 62.67 54.34 0.3 0.28
Expenses Capitalised 0 0 0 0
Total Expenditure 5453.23 4395.03 2534.95 1460.13
PBIDT (Excl OI) 835.6 663.39 383.11 233.02
Other Income 6.6 6.33 5.31 0.6
Operating Profit 842.2 669.72 388.42 233.62
Interest 281.93 253.85 135.12 83.64
PBDT 560.26 415.88 253.3 149.98
Depreciation 43.4 34.36 31.95 24.63
Profit Before Taxation & Exceptional
Items 516.87 381.52 221.35 125.34
Exceptional Income / Expenses 0 0 0 0
Profit Before Tax 516.87 381.52 221.35 125.34
Provision for Tax 175.26 107.68 49.74 14.76
PAT 341.61 273.84 171.61 110.59
Adj to Profit After Tax 0 0 -13.67 -1.77
Profit Balance B/F 178.98 124.04 132.61 61.73
Appropriations 520.59 397.88 290.55 170.55
Equity Dividend (%) 20 20 15 10
Earnings Per Share (Rs.) 19.51 23.18 15.51 10
Book Value (Rs.) 126.88 83.95 54.8 43.22
MBL INFRASTRUCTURES LTD
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BALANCE SHEET in Rs Cr
SOURCES OF FUNDS Mar-10 Mar-09 Mar-08 Mar-07
Share Capital 175.14 118.14 110.64 110.64
Share warrants & Outstandings 0 0 0 0
Total Reserve 2047.01 873.58 495.69 367.51
Shareholder's Funds 2222.15 991.72 606.32 478.14
Secured Loans 1383.72 1091.67 525.06 311.51
Unsecured Loans 529.66 673.7 319.93 240.28
Total Debts 1913.38 1765.38 844.99 551.79
Total Liabilities 4135.52 2757.1 1451.31 1029.93
APPLICATION OF FUNDS :
Gross Block 1146.05 874.95 678.26 549.99
Less: Accumulated Depreciation 321.28 278.31 233.31 199.99
Less: Impairment of Assets 0 0 0 0
Net Block 824.77 596.64 444.95 350
Lease Adjustment A/c 0 0 0 0
Capital Work in Progress 48.87 0 1.46 33.15
Pre-operative Expenses pending 0 0 0 0
Assets in transit 0 0 0 0
Investments 120 120 120 111.05
Current Assets, Loans & Advances
Inventories 976.56 401.85 225.72 126.21
Sundry Debtors 2401.06 1410.44 1055.63 607.91
Cash and Bank 330.17 449.85 271.12 228.16
Other Current Assets 11.45 8.43 5.5 1.84
Loans and Advances 1455.26 1053.24 547.72 261.98
Total Current Assets 5174.49 3323.82 2105.69 1226.1
Less : Current Liabilities and
Provisions
Current Liabilities 1326.74 885.14 1140.22 638.64
Provisions 556.17 306.79 22.68 17.86
Total Current Liabilities 1882.91 1191.93 1162.91 656.5
Net Current Assets 3291.58 2131.89 942.78 569.6
Miscellaneous Expenses not written off 0 0 0 0
Deferred Tax Assets / Liabilities -149.69 -91.43 -57.88 -33.87
Total Assets 4135.52 2757.1 1451.31 1029.93
Contingent Liabilities 321.39 340.73 364.23 0
MBL INFRASTRUCTURES LTD
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Operations and Overview During the year under review your Company has achieved gross
turnover of Rs. 6288.83 mn as against Rs. 5058.42 man for the previous year registering a
growth of 24% over the previous year. The profit before interest, tax and depreciation
(PBIDT) increased to Rs. 835.6 mn from Rs. 663.39 mn in the previous year, the Net Profit
after tax (PAT) increased to Rs. 341.61mn as against Rs273.84 in the previous year
RISK ASSOCIATED
⇒ Rise in Competition due to low entry barrier
The massive growth in infrastructure and reformation in the road construction segment has
encouraged more private players into the segment. These opportunities have brought in
competition into the segment. low entry barriers in this sector could affect margins going
forward.
⇒ Raw material volatility may hit profitability
The major raw materials required by the construction companies are cement, sand ,steel and
bitumen . The company has mitigated the risk by escalation clause but a sharp spike in
commodity cost will impact the margins of the company because the company cannot pass it on
the entire hike to the customers.
⇒ BOT projects dependent on traffic growth
The toll revenue depends on traffic growth and any slow growth in traffic which is lower than
our expectations will significantly impact the forecasted toll revenue.
⇒ Sensitive to government projects
The order book of the company has been dominated by government projects and the company is
dependent on them for fresh order inflows. Any slow down in the order outflow from these
clients due to any changes in government policies will have a major impact on the order book of
the company.
⇒ Execution risk of projects
The company has a track record of timely completion of projects. The company being a new
entrant in the BOT segment, there could be a potential execution risk. Land acquisition is also
another problem, any delays in project execution would affect the revenues of the company
going forward.
⇒ Integrated Order Book
Out of the total order book of Rs.15,893 mn the company is dependent on a single order for the
Construction of road at Rimuli-Roxy-Rajamunda section of NH215 in Orissa which constitutes
~41% (Rs.6550 mn) of the total order book. Any delay in execution will affect the growth of the
Company.
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COMPARISON WITH PEER COMPANIES
MBL C&C MADHUCON SUPREME IVRCL SADBHAV IRB
INFRA CONSTRUCTION PROJECTS INFRA INFRA ENGINEERING INFRA
Mkt Cap 283.2 253.42 789.61 394.36 1851.71 1952.88 5194.85
EPS 30.93 25.01 6.91 44.47 6.7 7.98 1.96
P/E 5.23 4.33 15.48 5.30 10.35 16.33 79.74
SALES(Cr) 625.65 1679.5 1393.86 561.1 5557.3 1272.14 77.22
PAT(Cr) 34.16 69.09 45.76 39.2 70.21 53.84 55.84
R0CE (%) 20.54 19.38 9.42 17.04 18.64 16.27 2.63
ROA (%) 126.88 225.56 78.34 109.75 69.3 313.21 41.24
DEBT
EQUITY (%) 0.86 1.34 0.89 2.23 0.87 1.08 0.48
NPM (%) 5.42 5.87 3.28 7.32 1.26 4.23 10.25
OPM (%) 14.09 23.7 10.4 19.3 11.92 11.38 25.04
Predominant focus on fast execution and a healthy order book are key reasons for
MBL to be able to maintain a healthy growth and margins as compared to its peer
companies. MBL is enjoying the highest ROCE as compared to its peers.
Considering the growth potential of MBL and comparing the PE multiple, we feel
that MBL is trading at a significant discount.
MBL INFRASTRUCTURES LTD
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Index Comparison
Performance
Chart
Performance Chart
Source:bseindia.com
The performance chart shows that with the increase in the net sales the net profit
has also shown a considerable increase but the market cap still remains the same.
Therefore there is a lot of potential in the stock of the company which needs to be
trapped
MBL INFRASTRUCTURES LTD
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NUTSHELL
We believe that the company is to witness robust growth going forward owing to its strong
execution track record, favorable dynamics of the construction industry. Healthy order book of
approx`1600 Cr which is 2.5 times its FY10 sales &will be the main revenue driver for the next
two years.MBL Infra has registered phenomenal top line growth over the past 3 years 55%
CAGR between FY07-FY10 on the back of a solid 50% CAGR in the Order Book over the same
period . This coupled with impressive execution track record of the company, makes us believe
that the top line will grow at a CAGR of 34% over FY10-FY12E. MBLIL has put in bids for new
Projects worth `3,500 crore. Its order book composition consists of orders from NHAI, Asian
Development Bank (ADB)/World Bank (WB) funded projects and others. Considering all these
factors we are bullish on the company and initiate a definite” buy” call.
MBL INFRASTRUCTURES LTD
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Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for
the purchase or sale of any financial instrument or as an official confirmation of any transaction.
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reliable but do not represent that it is accurate or complete and it should not be relied on as such.
Reliable investors are advised to satisfy themselves before making any investments. Incredible
Advisory Services Pvt Ltd does not bear any responsibility for authentication of the information
contained in the reports and consequently is not liable for any decision taken based on the same.
Incredible advisory servicesPvt. Ltd. or any of it’s affiliates shall not be in any way responsible
for any loss or damage that may arise to any person from any inadvertent error in the information
contained in this report. This document is provide for assistance only and is not intended to be
and must not alone be taken as the basis for an investment decision.
INCREDIBLE ADVISORY SERVICES
PVT. LTD.
Flat No. 103 (Bharat Chambers)
First Floor, 70-71, Scindia House
Connaught Place, New Delhi-110001
Phone/fax:91 11 23720101
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