Capacite Infraprojects: We initiate with‘buy’; TP of Rs 352

Tuesday 25th December, 2018

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# Capacite infra projects:We initiate with ‘ buy’; TP of 352
HDFC SECURITIES

CAPACITE INFRAPROJECTS (CIL) is an epc-focused company with expertise in the super high rise high rise segments. These are typically dominated by high end luxury residential projects and pose high entry barriers for contractors. We have seen very few EPC companies operate in this space L&T, CIL, Tata Projects, and Afcons. Over the short term (last 5 years), ClL has emerged as a significant player in this segment and has built durable relationships with mar due e clients.
Our interaction with ClL's clients suggested clear advantages, including (1) CIL's better preparedness at pre bid presentation stage ; (2) adoption of advanced form works design ; (3) management accessibility in case of dispute resolution and (4) strong execution track record. On the balance sheet side, (1) NWC days are under control with a 65-70 day guidance band (2) robust FY19-21E 26.4 % revenue CAGR (3) ROIC of 14.519 %&(3) valuation at 11.6x (core EPC) Dec-20E EPS. We initiate with ‘ buy’and a target price of ₹352 share.
ClLhas become a preferred vendor for marquee developers like Oberoi Realty, Tata Trust, Godrej Properties, etc. ClL ventured into Southern India with projects of Prestige Estates/ Brigade Enterprise, with significant possibilities of mining a larger share of their order book. NWC is further ring fenced by receivable discounting and creditors ! letters of credit. profitability has been the key driver of CIL's order booking and is evident from the rise in order book share of the high margin super high rise segment which now contributes about 28 % of order backlog against 19 % in FY17. With a robust FY19-21E 26.4 % revenue CAGR, ebitda margins 15 %, tight control on finance costs, CIL should deliver a 30.5 % FY19-21E EPS CAGR with PAT multiplying 1.7x. With the award of the recent Goregaon project and the Borivalli mall, YTD inflows from Oberoi group are close to breaching the ₹1000-crore mark.
Apart from its top 20 clients, it has a fat tail contributing 200-550 crore annually. This could increase as Capacite builds up its credentials in the government and industrial segments (Where it has just begun its foray in FY19).