Recommendation from Construction and Contracting Sector
This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.
GPT INFRAPROJECTS LTD. : MARCHING AHEAD AT A STEADY PACE
HERE IS WHY
✓Government’s focus on infrastructure
✓Prominent clientele
✓Strong order book
GPT Infraprojects Limited, the flagship company of the GPT Group, is a premier infrastructure company based out of Kolkata and is engaged in the execution of civil and infrastructure projects and manufacture of concrete sleeper for Indian Railways. The company primarily executes projects in areas like railways, roads, power and industrial sectors. The entity has strong project execution capabilities, a healthy financial base and enviable growth prospects across all areas of operation. Its clientele includes the likes of Indian Railways, IRCON International, National Highways and Infrastructure Development Co., and many other prominent companies.
Digging into the financials of the company, it reported net sales of ₹ 609.2crore in FY21 compared to ₹ 618 crore in FY20 which witnessed a de-growth of nearly 1.4 per cent. The infrastructure segment contributes nearly 79 per cent to revenues and the remaining 21 per cent is contributed by the concrete sleeper segment. The EBIDTA increased by 8.7 per cent as it stood at ₹ 91.3 crore in FY21 as against ₹ 84 crore in the previous year. Also, the PAT stood at ₹ 19.8 crore while it stood at ₹ 13 crore in FY20. PAT has jumped by 52.3 per cent. Although the top-line has been slightly hit, the company has managed to post strong bottom-line results.
However, the cash flows from operating activities decreased from ₹ 57crore in FY20 to ₹ 22.3 crore in FY21 by nearly 61 per cent. For the latest quarter ended December, revenue decreased by 6.48 per cent YoY to ₹ 159.56 crore from ₹ 170.61 crore in Q3FY21. On a sequential basis, the top-line was up by 24.25 per cent. The industry is gaining momentum as the economy is picking up. Large contracts have helped the company generate strong sales in infrastructure segment. Continued lockdown in South African region has led to drop in PBIDT (exclusive of other income) that was reported at ₹ 20.01 crore, down by 9.64 per cent YoY and the corresponding margin was reported at 12.54 per cent, contracting by 44 basis points YoY.
PAT was reported at ₹ 4.43 crore, down by 7.86 per cent YoY. The PAT margin stood at 2.78 per cent in Q3FY22, contracting from 2.82 per cent in Q3FY21. As of Q3FY22, the company has a healthy order book of ₹ 1,790 crore, which is almost three times revenue generated in FY21, reflecting the company’s growth perspectives. The management believes that the future order pipeline is looking strong which makes the growth story very promising. The company is optimizing its working capital and leverage position. Receivables have been a concern for the company, and the company is well on track of reducing receivables by ₹ 10-12 crore.
On the returns front, the ROE and ROCE stood at 8.53 per cent and 14.28 per cent, respectively. It has a debt-to-equity ratio of 1.1 times. The stock is trading near the P/E multiple of 10.3. It has a decent dividend yield of 3.18 per cent. Notably, the stock is trading a price-to-book value of 0.93 times. The government has shown renewed focus on infrastructure spending. In the Union Budget 2022-23, the PM Gati Shakti Yojana was announced which would be focusing on building roadways and railways as well. With the increased allocation towards capex-heavy sector like infrastructure, there are no two ways about the opportunities GPT Infraprojects will get in the next 12-18 months. By virtue of all these factors, we recommend our reader-investors to BUY the scrip.
