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Wednesday, April 4, 2012

Man Infraconstruction Ltd:Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Man Infraconstruction Ltd

Story:Man Infraconstruction executes construction contracts for residential, commercial and industrial buildings. These segments together contributed 94 per cent of the revenues for the year ending March '11, with the lion's share belonging to the residential real estate. The remaining revenues are accounted for by the infrastructure segment.The company has managed Rs 604 crore in order inflows this fiscal, the same level as the year before. The current order book stands at around Rs 2,000 crore.But the steadily falling revenues of the past five quarters point to problems in execution and the inability to convert order book into revenues.Proposed investment in infrastructure in the Twelfth Plan is huge, and orders could come in from this sector in the coming quarters even as real estate projects stay muted. But Man Infraconstruction has limited experience in infrastructure projects which could prevent it from securing orders. Its venture into development of roads has already hit a snag with a long delay in the awarding of its first project.It has a joint venture with a Turkey-based infrastructure company which could aid order securing, especially in the ports space.However, a joint venture could limit its share of earnings. The joint venture has not won a project thus far. Under the circumstances, strong growth in order book seems unlikely in the near term, relying as it does on residential and commercial real estate.More than half the company's order book comes from DB Realty, two of whose promoters are under investigation. Repeat orders from this client, may slow down.Revenues for the fiscal ended March '11 expanded just 8 per cent on the back of poor performance in the second half. Net profits fell 29 per cent for the year as raw material and construction costs bit. Operating margins fell sharply to 18 per cent from the 27 per cent the year before.The problems carried into the current fiscal too, with delays in project approvals and slow execution. Revenues and net profits have declined in each of the past three quarters compared to the year-ago periods.For the nine months ended December '11, revenues dropped 31 per cent and net profits fell 44 per cent. Lower raw material costs, however, helped the company maintain margins at 23 per cent for the period.But a rise in depreciation (due to heavy investment in capital equipment) and higher interest outgo led to lower net margins. For the nine months ending December '11, net margins were at 10 per cent, down from the 13 per cent in the year-ago period.At Rs 182, the stock is at an expensive 23 times the consolidated trailing 12-month earnings. Peers such as JMC Projects trade at lower multiples.Revenues and earnings for the company have been consistently declining over the past several quarters. More than half the current order book relies on a single client.The company also has limited experience in infrastructure projects, which are more promising in terms of order inflows than its forte of residential construction.The stock of construction contractor, Man Infraconstruction, has shot up 80 per cent since January this year. Investors can make the most of this rally and exit the stock.
Compiled by:Bhavana acharya

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