PYT Multi bagger recommendation - C&C Constructions

PowerYourTrade.com also for investors Not everyone in the market "trades" everyday. Some people invest for the long term and they are constantly sniffing around for those potential multi baggers. Ask an Infosys investor, he will tell you that ONE stock can change a person's life!!! We believe that enduring wealth can be built only by investments that gain steadily and safely. MULTI BAGGERS is where our top market experts give you ONE solid investment idea EVERY WEEK. Each a potential multi bagger according to them. Who knows which one will make you a millionaire?? Multi Bagger: C&C Constructions Ltd Recommended Price Rs 183.95 K.R Choksey Picks Report Dated: June 09, 2008 C&C Constructions Ltd (C&C) is an infrastructure project development company providing engineering, procurement and construction (EPC) services for infrastructure projects in India and abroad (Afghanistan). Their project expertise is primarily in transportation engineering projects including roads, bridges flyovers and airport runways especially in inhospitable environments. We Initiate coverage on C&C with a BUY recommendation based on SOTP valuations giving a 12 months price target of Rs 276, an upside of around 46% from the current levels. Investment Rationale: Robust Order Book: C&C has a robust order book of Rs 1,668 crore (5.05x FY2007 and 3.87x TTM net sales) which has swollen by about 58.7% since FY2007. Road segment constitutes approximately 96% of the total order backlog.   Past Multi Baggers Recommendations Stock Reco Price Peak after reco %Gain Balasore Alloys 6 78 1203 Reliance Infra 330 3202 870 TRF 240 2100 775 Opto Circuits 119 581 390 Usha Martin 32 154 380 Genus Power 246 1050 328 IDFC 55 235 327 Indo Tech Trans 200 808 304 Hind Zinc 288 1119 289 Thermax 255 968 280 Strong operating margins compared to peers: C&C enjoys operating margins in the range 18-20%, inspite of 96% of the order backlog in road segment. The high margin is attributable to operations in areas which has geographical and political constraints. Operations from Afghanistan fetch margins in the range of 22-25%. We believe C&C is well placed to enjoy higher operating margins due to expertise in executing these projects. Expertise in executing projects in inhospitable conditions: C&C have been successful in executing projects in difficult operating terrains and adverse weather conditions which helps them in commanding higher operating margins. In addition unavailability of key resources like machinery, material and personnel along with security challenges also poses execution risk for the company. Impressive financial performance: C&C reported revenue CAGR of 38.6% from FY2005 to FY2007. On operating margin front also, it enjoyed industry highest margins of 29.7% in FY2006 and 23.4% in FY2007. The company plans to diversify its areas of operations into Urban Infra, Irrigation and Power Transmission business with approximately 30% contribution by FY2010. We believe operating margin to take marginal hit, however will continue to enjoy margins above 17% going forward. Foray into BOT space: C&C has recently won BOT project from Kurali to Kiratpur on NH-21. We believe this project to be value accretive on the basis of IRR and is expected to contribute Rs 42 to the target price. Valuations & Financials: At the CMP of Rs 183.95, C&C is trading at a trailing P/E of around 8.2x and at a forward P/E of around 7.46x FY08E EPS and 5.63x FY10E EPS. Particulars FY2007 FY2008E FY2009E Net Sales 330.47 573.3 789.5 Growth (%) 0.5605 0.735 0.377 EBITDA 71.6 99.4 137.6 Growth (%) 0.344 0.388 0.384 Net Profit 33.2 46.3 61.4 Growth (%) 0.073 0.396 0.326 EPS (Rs.) 20.57 25.36 33.61 EBIDTM(%) 0.217 0.173 0.174 NPM (%) 0.1 0.081 0.078 P/E (x) 9.2 7.46 5.63 Share Holding (%) as at 31-03-2008: Promoters 69.25 FIIs 9.09 Mutual Funds/ Banks 9.93 Other Corp 1.99 Public and Others 9.74 Subscription Rates   3 years        Rs. 5999      1 years        Rs. 2999     6 months        Rs. 1999     3 months        Rs. 1349     1 month       Rs. 599   Disclaimer: This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, investors are advised to satisfy themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt Ltd., does not bear any responsibility for the authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same. Further, KRC Research Reports only provide information updates and analysis. All opinion for buying and selling are available to investors when they are registered clients of KRC Investment Advisory Services. As per SEBI requirements it is stated that, Kisan Ratilal Choksey Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation.