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stock update

Unity Infraprojects
Stock Update

Vultures Pick

Price target revised to Rs151

Company details Price target: Market cap: 52 week high/low: NSE volume: (No of shares) BSE code: NSE code: Sharekhan code: Free float: (No of shares) Shareholding pattern Rs151 Rs759 cr Rs138/50 2.3 lakh 532746 UNITY UNITYINFRA 2.8 cr

Buy; CMP: Rs102

Result highlights Q4FY2010 net profit up by 31.5%: Unity Infraprojects (Unity)s performance in Q4FY2010 was above our estimates. The net profit grew by 31.5% year on year (yoy) to Rs27.7 crore on the back of an impressive revenue growth of 28.6% yoy to Rs493 crore. For the full year, FY2010, the revenue and the profit after tax (PAT) grew by 30.6% yoy and 22.2% yoy to Rs1,477 crore and Rs85 crore respectively. EBITDA margin maintained: The operating profit margin (OPM) declined by 27 basis points yoy to 12.6% in Q4FY2010 due to higher construction expenses in the quarter. However, on a sequential basis, the OPM sustained at the same level. For the full year, OPM improved by 32 basis points to 13% on account of a lower raw material cost. The company expects to maintain its margins at around 13%. Strong order book: Unitys current order book stands at Rs3,477 crore, a stellar growth of 29% yoy. The present order book has an execution period of 2.5 years and is 2.4x FY2010 revenues, and provides a strong revenue visibility. During the year, the company saw a strong order inflow of more than Rs2,150 crore. Further, the company is also L-1 bidder for contracts aggregating to Rs800 crore. Attractive valuations: We remain positive on the company due to its growing order book and high operating margin. With Q4FY2010 performance of the company being marginally above our expectation and based on the
Results table Particulars Q4FY10 Q4FY09 383.6 0.9 7.1 391.7 170.1 15.9 135.7 12.5 334.2 49.5 6.8 17.6 32.2 12.1 21.0 13.4 3.1 12.9 5.5 37.5 % yoy 28.6 -354.0 -32.5 26.6 8.2 38.9 54.0 27.2 29.0 26.0 -32.4 -8.8 44.5 36.2 31.5 18.6 FY2010 1476.8 2.2 12.2 1491.2 617.8 53.2 576.5 37.9 1285.5 191.3 17.5 58.4 127.6 44.7 85.1 14.8 11.5 13.0 5.8 35.0 FY2009 1130.8 1.5 15.6 1147.9 497.5 43.3 418.9 28.4 988.0 142.8 15.9 40.0 102.4 34.3 69.7 13.4 10.4 12.6 6.2 33.5 Net sales 493.3 Share of profit from JV -2.4 Other income 4.8 Total revenues 495.8 Consumption of raw material 184.1 Staff cost 22.1 Construction expenses 209.0 Other expenditure 15.9 Total expenditure 431.0 Operating profit 62.3 Depreciation 4.6 Interest 16.1 PBT 46.4 Taxes 16.4 PAT 27.7 Equity capital 14.8 EPS(Rs) 3.7 Margin (%) OPM 12.6 NPM 5.6 Effective tax rate 35.3 Rs (cr) % yoy 30.6 43.2 -21.6 29.9 24.2 23.0 37.6 33.6 30.1 34.0 9.8 45.8 24.7 30.5 22.2 10.2

Foreign 13%

Institutions 7%

Public & others 17%

Promoters 63%

Price chart
145 130 115 100 85 70 55 40 Mar-10 Jun-09 Sep-09 Dec-09 Jun-10

Price performance (%) Absolute 1m 3m 6m 12m 4.8 4.3 93.9 65.0

-9.9 -10.5

Relative -6.8 -13.5 to Sensex

Sharekhan

June 01, 2010

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managements guidance, we are marginally revising our earnings estimates for FY2011 and FY2012. Our revised earnings per share (EPS) estimates now stand at Rs13.3 and Rs17.1 for FY2011 and FY2012 respectively. At the current market price the stock is trading at 7.7x FY2011 earnings estimate. We maintain our Buy recommendation on the stock with a revised price target of Rs151 as we roll forward our price/ earnings (P/E) multiple to FY2012. Strong order book of Rs3,477, 2.4x FY2010 revenues Unity saw a strong order inflow of more than Rs2,150 crore during the fiscal 2010. Consequently, the order book grew by 29% yoy to Rs3,477 crore, which is 2.4x FY2010 revenues. In the current order book, there has been a shift towards water and irrigation projects with same forming 55% of the order book, followed by civil engineering projects (35%) and transportation orders (10%). In terms of geographical spread also the company is well placed with the highest exposure to the western region (78%). Only 4% of the total orders come form Andhra Pradesh, which is also progressing well except one project worth Rs40 crore. In addition to the strong order book of Rs3,477 crore, the company is also L-1 bidder for contracts aggregating to Rs800 crore. Of this 75% are in civil engineering segment with the remaining come from the transportation segment. Going ahead, we expect the companys order book to log in a compounded annual growth rate (CAGR) of 25% over FY2010-12.
Break-up of order book in terms of geography and verticals Geography-wise
South 5% North 12% East 1% Overseas 4%

Kolkata project will start off in Q4FY2011. The company has already financed the land cost and the construction cost is expected to be met through pre-sales. Monetising its 25% stake in Pune project Unity jointly developed a 400-room five star hotelOrchid (for Kamat Hotels Group)in Pune. It owns 25% in the project special purpose vehicle (SPV) while the balance 75% is owned by Kamat Hotels. Recently, Clearwater Partners exited its 49% stake in the SPV, which was bought over by Kamat Hotels. Now, Unity is looking to monetise its investment and has entered into agreement with Kamat Hotels to exit its 25% stake for Rs46 crore payable in three years. Unity had invested Rs35 crore in the SPV through equity and debt. No progress on Nagpur and Goa projects There has been no progress as far as the Nagpur and the Goa projects are concerned. Unity has still not received land for four of the total six malls that were to be developed in Nagpur. It has approached Nagpur Municipal Corporation for the same and the response is awaited. However, it can completely drop the project and gets its upfront payment back. Even the Goa project has made no headway in the wake of political opposition. However, the company is keen on developing this project and hence is awaiting clearance. Valuation and view We remain positive on the company due to its growing order book and high operating margin. With Q4FY2010 performance of the company being marginally above our expectation and based on the managements guidance, we are marginally revising our earnings estimates for FY2011 and FY2012. Our revised EPS estimates now stand at Rs13.3 and Rs17.1 for FY2011 and FY2012 respectively. At the current market price the stock is trading at 7.7x FY2011 earnings estimate. We maintain our Buy recommendation on the stock with a revised price target of Rs151 as we roll forward our P/E multiple to FY2012.
Valuation table Particular Net sales (Rs cr) EBITDA (Rs cr) Margin (%) Net profit (Rs cr) No of shares (cr) EPS (Rs) % y-o-y growth PER(x) BVPS (Rs) Price/BV(x) EV/EBITDA(x) RoCE(%) RoNW(%) FY08 849.5 106.2 12.5 60.0 6.7 9.0 41.7 11.4 53.2 1.9 8.1 21.6 18.2 FY09 1130.8 142.8 12.6 69.7 6.7 10.4 16.1 9.8 62.6 1.6 7.3 18.6 18.0 FY10 1476.8 191.3 13.0 85.1 7.4 11.5 10.3 8.9 76.7 1.3 5.6 17.3 17.3 FY11E 1833.6 234.7 12.8 98.2 7.4 13.3 15.4 7.7 88.8 1.2 6.2 17.4 16.0 FY12E 2294.4 293.7 12.8 126.6 7.4 17.1 28.9 6.0 104.7 1.0 4.9 19.3 17.7

Vertical-wise
Civil Construction 35% Water & irrigation 55%

West 78%

Transportation 10%

Two housing projects in Kolkata and Bangaluru to start construction in FY2011 Unity plans to develop two mixed-use housing projects aimed at middle-to-high income segmentsone in Kolkata and Bangaluru each. The company has already acquired 37 acre of land in these two cities at a cost of Rs102 crore. The Bangaluru project is coming up at Kodigahalli near the new airport and has potential floor space index (FSI) of about 3x. The Kolkata project is coming up near EM Bypass road and has potential FSI of 2.75x. The Bangaluru project will kick off in Q3FY2011 while the
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June 01, 2010

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