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Tuesday, September 7, 2010

C & C Constructions Ltd:-A safe defensive buy

Scripscan:C & C Constructions Ltd
Duration:6-8 months

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.C&C also undertakes contracts through joint ventures, allowing access to bigger projects and boosting own expertise.C&C has a strategy of owning high-end equipment, with investment increasing over 60 per cent in FY09. Such investment ensures timely availability of critical equipment, besides operational efficiency.The company is poised to increase order intake as spending on infrastructure and urban development grows. The order book stands at 3.7 times the sales of FY09 (July 2008 to June 2009) with an average execution period of 24 months, providing near-term earnings visibility.The company`s plans of bidding projects in JV with Isolux Corsan in the verticals where C & C Const lacks either technical or bidding capacity related issues are quite promising.Going forward, company`s plans of entering other overseas markets like Russia, Africa and Asian countries will give further revenue visibility.I value core construction business of the company at 8 times forward multiples which translates to Rs 316 per share.I value the BOT road project (Kurali-Kiratpur) using DCF approach which yield per share value of Rs 24.Thus my target price for the stock is Rs 340 implying 40% return.

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