**[investwise]** C&C Construction-BUY with a 12 month target of Rs 350 [1 Attachment]

 

[Attachment(s) from Maverick included below]

C&C has ownership of critical high end and modern construction equipment such as crushers, excavators, cranes, batching plants, pavers, etc. Ownership of such high end equipment enables quick mobilization besides ensuring continuous availability of critical equipment.   This ownership model of equipment aids C&C in Afghanistan by giving it an edge over competition.   C&C is developing road projects worth `1,500 crore in Bihar, three road projects, including Yamuna Expressway contract in UP and six parking lots in Delhi to accommodate up to 300 vehicles each in preparation of the upcoming Commonwealth Games. Afghan Project in the books currently having 2 projects one funded by India (parliament and consulate) and another by US.   At present, the company is executing projects worth `3,000 crore projects (bill to book of 2.6x), 11 per cent of which is based in Afghanistan while the rest comes from India. Afghan Parliament work order is one of the prime contracts the company is executing in Afghanistan.   The 53% is from roads & highways, 27% from buildings, 14% railways, 5% from water & sewerage and 1% from transmission. C&C is expanding its footprint in various Asian economies and are targeting projects worth about `8,000 crore in the next six months.   With this motive in the mind, C & C has signed MoU with Isolux Corsan of Spain to jointly execute construction projects across a series of verticals. In the JV, the Indian firm will hold a 40 per cent stake and the remaining equity will be held by the Spanish company. With this, the company has strengthened its international presence.   In the near future, C&C is planning bids for projects worth $1200 million (`5,595 crore) in Oman, Kuwait and Afghanistan to enhance its overseas presence. Bids for `10, 000 crore in India are either in PQ or various other stages of tendering process.   C & C expects to bag orders worth about `2, 500 crore at least. For its immediate Capex, C&C has raised over `177 crore through a combination of promoter warrants, private equity and a QIP. Of which about `50 crore raised from promoters at a price of `253 and `76.87 crore via QIP at `243.80. The balance is raised through PE under which it allotted 50 crore CCPS of `10 each on July 2010 to IL&FS Trust Company acting as sole trustee for India Venture Trust.   ILFS conversion price is linked to profits of C & C in the coming year. C&C expects the conversion price of about `300-310 at the end of 18 months.   As per the Union Budget 2010-11, allocation for infrastructure projects for the ensuing fiscal is `1, 73,552 crore ($38.5 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.   C&C is likely to post an EPS of `34 in FY11 and `42 in FY12. At the CMP of `250, the share is trading at a P/E of 7.4x on FY11E and 6.0x on FY12E. We recommend BUY with a target of  Rs 350 in the medium term. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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