Company Overview:
C&C Constructions Ltd (C&C), is a Delhi based EPC (Engineering, Procurement & Construction) company having experience of more than two decades in designing & executing various infrastructure projects. In its bid to expand its presence across various other domains of infrastructure, C&C has entered in JV with various firms like BSCPL Infrastructures Pvt Ltd for construction of roads & M/S Sukhmani Engineers Pvt Ltd for addressing opportunities coming across the water sewage & sanitation vertical of the infrastructure industry. C&C also has presence in Afghanistan where an order currently under execution is the parliament building of Afghanistan.
Investment Thesis:
Fast growing Infrastructure Company with strong order back log
In last 4 preceding financial years C&C's revenues have increased by a CAGR of 45% while EBITDA in absolute terms have jumped by CAGR of 36%. C&C currently has an order back log of Rs.30 Billion executable in forthcoming 2 financial years. Thus, giving strong revenue visibility.
Presence across various segments of Infrastructure industry and strong customer base of Govt. backed corporations & corporate customers
Major business domains where C&C currently has order back log includes construction & maintenance of roads, pipe rehabilitation contracts and construction of buildings & railways related works. List of C&C's customers mainly include Municipal Corporations & Govt. departments of various ministries across different states like Bihar, Punjab, Haryana, Delhi etc. Customer profile across private sector enterprises includes companies like Tata's, L&T, Bharti Infotel etc.
Strategy of entering in JV's for expansion of business verticals coupled with expanding kitty of BOT projects
C&C has entered into JV's with various firms for expanding its presence across business verticals under the infrastructure industry. BOT (Build Operate Transfer) projects currently under execution includes project for a bus terminal cum commercial complex in Mohali & 44 km long road project located in Punjab between Kurali and Kiratpur.
Well placed strategy to maintain operating margins above 20%
C&C capability to execute infrastructural projects in geographical areas with difficult climatic conditions & terrain across the northern & central India has enabled company to bag orders with high operating margins. We expect the trend to continue going forward as well.
Investment Concerns:
Constant rise in debt liabilities
Volatility in input prices
Valuation
At the CMP of Rs.242, C&C trades 5.4x its FY 11E's EPS of Rs.44.5 and 3.2x its FY 12 E's EPS of Rs.75.4. Valuation seem to be on the lower side compared to the peers in the industry. Our valuation matrix comprises of C&C EPC business and Kurai – Kiratpur project which is on the verge of completion.
We recommend buy on C&C with target price of Rs.325 which represents an upside of 34% from its existing market value.
Kindly find attached the detailed report.
Attachment(s) from Deepak Aggarwal
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Happy Trading,
United we grow!!!
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