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Thursday, May 21, 2009

Niraj Cement Structurals Ltd:-Future outlook and growth prospects

Scripscan:Niraj Cement Structurals Ltd
Traded in:Nse-bse

Story:Niraj Cement focuses on road construction projects. It is a leading company in the western region with in-house technical and manufacturing capability in cement structurals and concrete pre-casts. But bulk of its output is used for captive consumption. The company executes projects in Maharashtra and Orissa and intends to spreads its area of operations to other states. It has also begun to bid for BOT projects in the highways sector, in a JV or consortium with other players.Other growth drivers include proposed investment in ready-mix concrete (RMC) and expansion of its concrete pre-cast manufacturing capacity. Niraj Cement plans to invest around Rs 10.5 crore to set up four RMC plants for captive use, as well as for selling to third parties. A similar investment will go towards setting up a paver-block plant to meet captive requirements.In the past three years ended FY08, the company''s net sales have recorded a CAGR of 43%, while operating profit has witnessed a CAGR of 54%. Net profit during the period saw a CAGR of 60%. But bulk of the company''s growth was recorded during FY06 and FY07, with FY08 being a lean year. Given its order book and execution cycle, the scrip is priced at less than 3 times its FY10 forward EPS. This is quite attractive and offers significant upside potential for long-term investors.My estimate is based on the assumption that the company will grow at over 40% for at least the next two years and operating margins will remain stable at current levels. The downside risk is an expected slowdown in awarding of new infrastructure projects and the company''s inability (if any) to execute projects on time.Overall it looks good coming quarter numbers would dictate the trend for the company in the bourses.

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