Capacit’e Infraprojects Ltd, incorporated in Aug 2012 and headquartered in Mumbai; is a fast growing construction company, focused on providing end-to-end construction services for Residential, Commercial and Institutional buildings. The company has a niche operating play with specialized focus on construction of High Rise and Super High Rise buildings and possesses technological competence for the same. As of 31 May 2017, Capacit’e has an order book of INR 46,024.76 mn with 56 ongoing projects across major metro cities in India; with Residential/Commercial/Institutional buildings constituting for 90.05%/9.58%/0.37% of their order book respectively. On geographical stand point, the order book comprises of 70.83%/22.84%/6.33% from West Zone/South Zone/North Zone respectively. The company boasts of a marquee clientele including The Lodha Group, The Wadhwa Group, Godrej Properties Ltd, Oberoi Constructions Ltd, Brigade Enterprises Ltd and so on. Going ahead, the company aims to grow its market share through expansions in major cities with high growth potential and undertake projects on a design-build and lock-and-key basis providing higher revenue potential and increasing scope of services provided by Capacit’e.
Valuation and Outlook:Capacit’e Infraprojects Ltd is a fast growing construction company with concentrated and specialized focus on providing end-to-end services for construction of Super High Rise and High Rise residential buildings. The company also possesses a forte in construction of commercial and institutional projects. Apart from construction services, the company also provides MEP (Mechanical, Electrical, Plumbing) and finishing works. Incorporated in 2012, the company focused on its core competency of construction of buildings without engaging in any other activities such as land or infrastructure development. The management believed in owing the gross block and over the years has invested in core assets (specialized formwork technologies) like automatic climbing system formwork, aluminium panel formwork, crane enabled composite table formwork and so on. Consequently, ownership of modern technology enabled high quality and timely execution of projects which led to a marquee clientele for the company. The company boasts of a reputed clientele group including The Lodha Group, The Wadhwa Group, Godrej Properties Ltd, Oberoi Constructions Limited, Brigade Enterprises Ltd, Rustomjee, Saifee Burhani Upliftment Trust and so on. The high quality and timely execution of projects has resulted into securing repeat orders from The Lodha Group, The Wadhwa Group, Godrej Properties Ltd, Transcon Developers Pvt Ltd, and so on; which in our view depicts the strong brand recall value for the company. Capacit’e has one subsidiary CIPL-PPSL-Yongnam Joint Venture Constructions Private Ltd (CPYJVC) which acts as a special purpose project specific company to carry on the business of design, construction and development of housing projects.
The company possesses an order book of INR 46,024.76 mn as on 31st May 2017 comprising of 56 ongoing projects resulting into book-bill ratio of ~4x. Going ahead; increase in urban population, growth in per capita income, nuclearisation of families, healthy growth in service sector and favorable interest rates act as the key triggers for top-line growth for the company. Subsequently, under-taking of projects on design-build and lock-and-key basis should result into considerable increase in operating margins for the company. In terms of valuation, on the upper price band of INR 250, the company has been valued at ~24x on FY17 earnings as against 21.62x for Ahluwalia Contracts (India) Ltd and 16.2x for Simplex Infrastructures Ltd. We believe, valuations are reasonable given the prolific market size and potential to grow coupled with robust financial performance over FY14-FY17. Hence, we recommend ‘SUBSCRIBE’ rating on the issue.