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Wednesday, December 9, 2009

C & C Constructions Ltd:Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis

Scripscan:C & C Constructions Ltd

Story:This is a Delhi-based company catering largely to the construction and primarily the road sector. The USP of this company is that this company has been undertaking most of the projection terrains which are supposed to be difficult terrains to do business or to operate in. Due of this the operating profits of the company are probably one of the highest in the industry.This company has got an order book of close to Rs 3,100 crore, which includes about Rs 1,830 crore of orders in its own books and about Rs 1,270 crore is the company share of orders in joint ventures. Some of these orders are construction orders. They have about Rs 1,200 crore orders from the Bihar road transport department for freight corridor and road projects in Bihar. Then they have got about Rs 700 crore of projects in Afghanistan which includes the Chancery building in Kabul.In the build-operate-transfer (BOT) segment they have a few toll road projects which includes Kurali-Kiratpur road covering an area of 44 kilometers and Mohali bus terminal project which is again on a BOT basis and allows the company to develop and sell commercial and real estate space there.If you look at the financials of the company for FY09 sales were about 750 crore, profit after tax was about 41 crore. This was inspite of an increase in interest cost by about 130%. Sales for Q1 is about 170 crore, profit after tax is about 5.5 crore which is up by 10% compared to same period last year.You have a company where the operating margin is 20% which is one of the highest in the industry, market cap at the current price is about 430-435 crore, this is against the order book of about 3,100 crore. EPS on trailing 12 month basis is about Rs 23-24 which means that the stock trading at about Rs 235-240 is trading at a P/E multiple of about 10 and promoters holding of 70% provides added confidence and moreover central government has already rolled out an aggressive development plan in the road sector and it is expected that National Highways Authority of India (NHAI) will allot some road projects in the next two quarters, I think when talks of allotment of road project starts then these kind of stocks would undergo a re-rating.At the current price of about Rs 235-240 crore the downside looks restricted because the P/E multiple of about 9-10 is not overpriced and given the potential in the sector and given the fact that their current order book is roughly four years of their yearly revenues, this provides revenue on profit visibility atleast for the next couple of years, so at Rs 235-240 the stock looks to be a value buy at the current valuations.

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