Capacit`e Infraprojects | Initiating Coverage
May 28, 2018
Capacit`e Infraprojects
BUY
CMP
`273
Capacity to Build
Target Price
`340
Capacit`e Infraprojects Limited (CIL) is a leading building construction
company, with majority focus on residential construction, which constitutes
Investment Period
12 Months
more than
85% of the company`s
`5,682cr order book. It caters to
established
realtors such as Kalpataru, the Wadhwa group, Oberoi
Stock Info
Construction Ltd, Lodha, Rustomjee, TATA trust & Godrej properties.
Sector
Construction-Reality
Large order book with marquee client base provides revenue visibility: CIL’s
Market Cap (` cr)
1,850
current order book stands at ` 5,682cr (`4,830cr from residential segment and
Beta
1.2
`852cr from commercial/institutional segment). This gives CIL a revenue visibility
52 Week High / Low
437/269
for the next 3-4 years. Large part of its order book is contributed by Gated
Avg. Daily Volume
24,342
Community with ~47% share, followed by High Rise and Super High Rise
Face Value (`)
10
Buildings at ~43%.
Focused approach leads to strengthening positioning: Despite its nascent age
BSE Sensex
34,924
given that it was incorporated in Aug 2012, CIL’s revenue grew six-fold to `1,341cr
Nifty
10,605
in FY18 from `214cr in FY14 owing to managements focused approach on the
Reuters Code
CAPE.NS
residential space (high rise) and over period of time increases presence in 7 cities.
Bloomberg Code
CAPACITE.IN
This has led CIL to report above average EBITDA margin of 15.2% and RoCE of
15% in FY18.
Expansion in development area of MMR region: In a recent development,
Shareholding Pattern (%)
Maharashtra government has unveiled Mumbai’s Development Plan 2034, which
Promoters
43.8
will increase the FSI (Floor space Index) for residential projects in south and
MF / Banks / Indian Fls
6.6
central Mumbai to 3 from the earlier 1.33. We believe increased FSI will trigger
FII / NRIs / OCBs
5.6
construction of High and Super High Rise tower on smaller sizes of land as well.
Outlook & Valuation: The sector is undergoing tectonic changes, which in turn
Indian Public / Others
44.1
should increase confidence amongst home buyers towards reputed developers as
a preferred choice while buying home. With 3-4X of order book, improving
Abs.(%)
3m 1yr 3yr
financial indebtedness, and association with reputed and healthy developers, we
believe CIL is in a sweet spot to tap upcoming opportunities in the Real Estate
Sensex
2.0
13.0
24.0
sector. At the CMP of `273, stock is available at PE of 14x of FY20E EPS of
CAPACITE
(20.0)
`20. On a conservative basis we like to assign a multiple of 17x to FY20E EPS
and arrive at target price of `340 with potential upside of 24% and
Chart since inception
recommend to ACCUMULATE the stock.
450
Exhibit 1: Key Financials
400
350
Y/E March (`cr)
FY16
FY17
FY18
FY19E
FY20E
300
Net Sales
853
1155
1341
1676
2095
250
% chg
54
35
16
25
25
200
Net Profit
49
69
80
103
136
150
% chg
52
42
15
29
32
100
EBITDA
115
203
204
255
318
EPS (Rs)
9
13
12
15
20
P/E (x)
29
20
23
18
14
P/BV (x)
11
6.17
2
2
2
Source: Company, Angel Research
RoE (%)
28
23
11
12
15
RoCE (%)
30
30
15
18
20
Kripashankar Maurya
EV/EBITDA
12
10
8
6
5
022 39357600, Extn: 6004
EV/Sales
2
2
1
1
1
Source: Company, Angel Research; Note: CMP as of May 25, 2018
May 28, 2018
1
Capacit`e Infraprojects | Initiating Coverage
Company background
Capacit'e Infraprojects Limited is a leading building construction company having
presence in MMR, NCR, Varanasi, Bengaluru, Hyderabad, Chennai, Kochi and
Pune, with specialization in construction of super high-rise buildings. The key
clientele include Kalpataru, Lodha Group, Oberoi Constructions, Rustomjee,
Emaar, Brookefield Asset Management, Sattva Group, The Wadhwa Group, Saifee
Burhani Upliftment, Godrej Properties, Radius Developers, Prestige, Purvankara,
Brigade Enterprises and Tata Trust among others.
Furthermore, CIL believes in owning equipment that is required throughout the
lifetime of a project or if project cycle is shorter, hire on rental basis equipment
like formwork, tower cranes, passenger and material hoists, concrete pumps and
boom placers (collectively, “Core Assets”) as this allows company to have timely
access to key equipment required for its business.
The company has been working for a number of reputed clients and is associated
with some marquee construction projects in India like Trump Tower.
Exhibit 1: Order Book
6000
Order Book
4.5
4
5000
3.5
4000
3
2.5
3000
2
2000
1.5
1
1000
0.5
0
0
FY15
FY16
FY17
FY18
Order Book
X times
Source: Company, Angel Research
Exhibit 2: On-going projects Mar-18
Type of Project
No of projects
Super High rise Buildings
11
High Rise Buildings
24
Other Buildings
6
Gated Communities
16
Source: Company, Angel Research
May 28, 2018
2
Capacit`e Infraprojects | Initiating Coverage
Key Management Personnel
Mr. Deepak Mitra is the Chairman and Independent Director. He has been
associated with the company since February 25, 2015. He has a bachelors’ degree
in civil engineering from the Calcutta University, with ~56 years of experience.
Prior to joining the company, he was on the board of directors of Petron Civil
Engineering Private Limited for over 26 years.
Mr. Rahul R. Katyal is the Managing Director and has been associated with the
company since incorporation. He holds a higher secondary certificate from the
Maharashtra State Board. He has approximately 23 years of experience. Prior to
incorporating the company, he has been on the board of directors of Capacit’e
Structure Limited (CSL) and key managerial personnel at Pratibha Industries
Limited till 2012. He is currently focused on business development and operations
of the company.
Mr. Rohit R. Katyal is the Executive Director and Chief Financial Officer of the
company. He has been associated with our company on a continuous basis since
March 1, 2014. He holds a bachelors degree in commerce from the University of
Mumbai, with ~25 years of experience. Prior to joining the company, he has been
on the board of directors of Pratibha Industries Limited till 2012 and CSL till 2014
(for about 16 years).
May 28, 2018
3
Capacit`e Infraprojects | Initiating Coverage
Investment Rationale
Large order book with marquee client base provides revenue visibility:
CIL’s current order book stands at `5,682cr (`4,830cr from residential segment, `
852cr from commercial/institutional segment). This gives CIL a revenue visibility
for the next 3-4 years. Large part of its order book is contributed by Gated
Community with ~47% share followed by High Rise and Super High Rise Buildings
at ~43%.
Exhibit 3: Order book multiple (X)
Order Book
6000
4.5
4
5000
3.5
4000
3
2.5
3000
2
2000
1.5
1
1000
0.5
0
0
FY15
FY16
FY17
FY18
Order Book
X times
Source: Company, Angel Research
Exhibit 4: Zone wise Oder book
Exhibit 5: Order Book Split
Geography
% of Order Book
Type Of Project
% of Revenue
West zone
87
Gated Community
47
North Zone
7
High Rise
28
South Zone
6
Super High Rise
15
Source: Company, Angel Research
Other Buildings
10
Source: Company, Angel Research
May 28, 2018
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Capacit`e Infraprojects | Initiating Coverage
Exhibit 6: Key Projects
Clients
Project
Location
Type
RESIDENTIAL PROJECTS
Kalpataru
Magnus MIG V
Bandra, MMR
High Rise
Oberoi Constructions
Tardeo
Tardeo, MMR
Super High Rise
Kalpataru
Kalpataru Immensa
Thane, MMR
Gated Community
Oberoi Constructions
Enigma
Mulund, MMR
Super High Rise
T Bhimjyani Reality
Neelkanth Woods - Phases I & II
Thane, MMR
Gated Communities
Saifee Burhani Upliftment
Saifee Burhani Upliftment Project - Sub cluster 03 Bhendi Bazaar, MMR
High Rise
Prestige Estates
Prestige Hillside Gateway
Kochi
Gated Community
Rustomjee
Rustomjee Seasons
BKC, MMR
Gated Community
Godrej Properties
Godrej Central
Chembur, MMR
Gated Community
The Wadhwa Group
H Mill
Prabhadevi, MMR
Super High Rise
Puravankara Projects
Purva EVOQ
Chennai
Gated Community
Lodha Group
The Park - Towers 3 and 4
Worli, MMR
Super High Rise
Godrej Properties
Godrej Summit, Phase II
Gurugram, NCR
Gated Community
COMMERCIAL & INSTITUTIONAL PROJECTS
Tata Trust
Varanasi University
Varanasi
Other Buildings
Oberoi Constructions
Worli
Worli, MMR
Other Buildings
Bharti Land
Worldmark
Gurugram, NCR
High Rise
Ozone Group
Urbana Hyatt Palace
Bengaluru
Other Buildings
Sri Gangaram Hospital
Multi-level Car Parking
New Delhi, NCR
Other Buildings
Brigade Enterprises
WTC
Chennai
High Rise
Source: Company, Angel Research
Expansion in development area of MMR region
In a recent development, Maharashtra government has unveiled Mumbai’s
Development Plan 2034, which has increased the FSI (Floor space Index) for
residential projects in south and central Mumbai to 3 from the earlier 1.33. We
believe the increase in FSI will trigger construction of High rise and Super High
rise towers, on smaller sizes of land as well. The government has also raised
residential FSI for suburbs to 2.5 from 2. For other commercial real estate, FSI has
been raised from 1.33 in the island city to 5 and from 2.5 in the suburbs to 5. With
this development, MMR has unlocked ~3,700 hectares of land in the outskirts of
Mumbai, of which 2,400 hectares is allocated for affordable housing. CIL is in
better position to tap this opportunity, as it already has presence in the said
region with reputed developers.
Focused approach leads to strengthening positioning:
Despite its nascent age, given that it was incorporated in Aug 2012, CIL’s revenue
grew six-fold to ` 1,341cr in FY18 from ` 214cr in FY14 owing to management’s
focused approach on the residential space (high rise) and over period of time
increases presence in 7 cities. This segment has less competition and of late, there
has been a dearth of delivery focused contractors mainly owing to leveraged
positions. This has led CIL to report above average EBITDA margin of 15.2% and
RoCE of 15% in FY18.
May 28, 2018
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Capacit`e Infraprojects | Initiating Coverage
Exhibit 7: Growth Strategies
Continue to remain focused on building construction
Expand in the mass housing segment
Increase focus on & execute greater number of projects on a lock-and-key basis
Undertake projects on a design - build basis
Bid for, and undertake, projects in the public sector
Capitalise on changes on account of the implementation of the RERD Act
Expand our presence in cities with high growth potential
Source: Company, Angel Research
Expanding presence in cities with a high growth potential & mass housing
projects supported by government:
With the implementationof RERA, timely execution of project is a must, failing
which a penalty would be imposed on developers. Hence, we believe developers
will approach reputed contractors having good track record of executing projects
on time. This should lead to large chunk of orders getting directed towards EPC
players like Capacit`e. Hence, expansion in new cities will be a focused area going
ahead with reputed developers.
CIL’s client base, consisting some of India’s leading real estate developers, allows
them to bid for and secure a broad range of projects. Further, we believe that its
ongoing execution of certain redevelopment projects, such as the Saifee Burhani
Upliftment Project - Sub cluster 03 and Rustomjee Seasons, will allow it to qualify
and bid for mass housing projects in the future. We believe that the consistent
growth in CIL's order book position is a result of its sustained focus on building
projects and ability to successfully bid and win new projects.
Track record of healthy financial performance:
CIL has reported revenue CAGR of ~58% over FY2014-18 largely on the back of
(a) experienced promoters (the long and rich experience with Pratibha Industries,
involved in similar business, helped the promoters to deliver projects on time), (b)
focused approach in residential space in Tier I and II cities. On the bottom-line
front, the company has reported CAGR of ~109% over FY2014-18.
May 28, 2018
6
Capacit`e Infraprojects | Initiating Coverage
Exhibit 8: Improving Margin
Exhibit 9: Revenue Trend (` in cr.)
20
2500
160
18
140
16
2000
120
14
12
1500
100
10
80
8
1000
60
6
40
4
500
2
20
0
0
0
FY16
FY17
FY18
FY19E
FY20E
FY16
FY17
FY18
FY19E
FY20E
EBIDTA %
PAT %
Total operating income
EBITDA
PAT
Source: Company, Angel Research
Source: Company, Angel Research
Exhibit 10: Key Ratios
Exhibit 11: Valuation Ratios
120
35
100
30
25
80
20
60
15
40
10
20
5
0
0
FY16
FY17
FY18
FY19E
FY20E
FY16
FY17
FY18
FY19E
FY20E
Inventory / Sales (days)
Receivables (days)
Payables (days)
RoE (%)
RoCE (%)
Source: Company, Angel Research
Source: Company, Angel Research
Peer Comparison
Exhibit 12: Comparative PE (X)
FY16
FY17
FY18
FY19E
FY20E
Capacit`e
30
33
23
18
14
Ahluwalia Contracts
25
25
22
18
15
JMC
-
-
24
17
16
Simplex
24
19
18
24
16
PSP
76
36
77
75
70
Source: Company, Angel Research
Exhibit 13: Margin %
FY16
FY17
FY18
FY19E
FY20E
Capacit`e
13
14
15
15
15
Ahluwalia Contracts
13
12
15
13
13
JMC
10
11
10
10
10
Simplex
12
13
10
10
11
PSP
7
15
17
13
14
Source: Company, Bloomberg, Angel Research
May 28, 2018
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Capacit`e Infraprojects | Initiating Coverage
Exhibit 14: ROE %
FY16
FY17
FY18
FY19E
FY20E
Capacit`e
28
23
11
12
15
Ahluwalia Contracts
20
17
21
21
20
JMC
8
9
13
14
15
Simplex
8
9
10
7
10
PSP
48
34
21
27
27
Source: Company, Angel Research, Bloomberg
Outlook & Valuation
Real estate sector has gone through with historical changes like RERA (focuses on
timely delivery of projects), Infrastructure status to affordable housing, credit
linked saving scheme (CLSS), PPP module and GST, which brings a confidence
among its all stakeholders. Government’s continuous focus on affordable housing
and smart city mission will attract more investments in the sector especially in
Residential & Commercial segment. As the sector going through with tectonic
changes which in turn increase confidence amongst home buyer towards reputed
developer as preferred choice while buying home. In short span of time CIL has
establishes its relation with reputed developer in India especially in MMR region
most promising real estate market. With 3-4X of order book and improving
financial indebtedness and association with reputed and healthy developer we
believe CIL is in a sweet spot to tap upcoming opportunity in Real Estate sector.
At the CMP of ` 273, stock is available at PE of 14x of FY20E EPS of ` 20. On a
conservative basis we like to assign a multiple of 17x to FY20E EPS and arrive at
target price of
`
340 with potential upside of
21% and recommend to
ACCUMULATE the stock.
Key risks
Short history of financials
The Company was incorporated on August 9, 2012. So, all the financial analysis
has been done for only 4 years. This is very less period to judge accounting
quality of the any company.
Manpower Shortage
Availability of manpower is key to execute any construction activity hence any
shortage in manpower availability may adversely affect operational efficiency of
CIL.
May 28, 2018
8
Capacit`e Infraprojects | Initiating Coverage
Income Statement
Y/E March (` cr)
FY16
FY17
FY18
FY19E
FY20E
Total operating income
853
1155
1341
1676
2095
% chg
54
35
16
25
25
Total Expenditu re
739
952
1137
1422
1777
Raw Material
625
814
971
1214
1517
Personnel
73
90
117
146
182
Others Expenses
40
48
50
62
78
EBITDA
115
203
204
255
318
% chg
82
77
0
25
25
(% of Net Sales)
13
18
15
15
15
Depreciation& Amortisation
16
65
67
84
105
EBIT
99
138
136
170
213
% chg
83
40
(1)
25
25
(% of Net Sales)
12
12
10
10
10
Interest & other Charges
32
42
40
41
38
Other Income
7
11
25
28
30
(% of Sales)
1
1
2
2
1
Extraordinary Items
0
0
0
0
0
Share in profit of Associates
0
0
0
0
0
Recurring PBT
74
106
122
157
205
% chg
61
43
14
29
31
Tax
26
37
42
54
70
(% of PBT)
34
35
35
35
34
PAT
49
69
80
103
136
% chg
52
42
15
29
32
(% of Net Sales)
5.7
6.0
5.9
6.1
6.5
Basic & Fully Diluted EPS (Rs)
9
13
12
15
20
% chg
52
42
(12)
29
32
May 28, 2018
9
Capacit`e Infraprojects | Initiating Coverage
Balance sheet
Y/E March (` cr)
FY16
FY17
FY18
FY19E
FY20E
SOURCES OF FUNDS
Equity Share Capital
8
44
68
68
68
Reserves& Surplus
163
256
680
760
862
Minority Interest
2
0
0
0
0
Shareholders Funds
173
299
748
832
930
Total Loans
159
165
187
120
195
Other Liab & Prov
119
155
144
192
239
Total Liabilities
451
619
1079
1143
1364
APPLICATION OF FUNDS
Net Block
239
330
409
423
469
Investments
0
0
0
0
(0)
Current Assets
612
718
1207
1304
1588
Inventories
221
181
224
230
258
Sundry Debtors
275
368
419
436
488
Cash
37
50
324
351
475
Loans & Advances
73
30
52
66
82
Other Assets
5
89
188
222
284
Current liabilities
425
490
655
731
885
Net Current Assets
187
228
553
573
703
Other Non Current Asset
24
61
118
147
183
Total Assets
451
619
1079
1143
1364
May 28, 2018
10
Capacit`e Infraprojects | Initiating Coverage
Valuation Ratios
Y/E March
FY16
FY17
FY18
FY19E FY20E
Valuation Ratio (x)
P/E (on FDEPS)
29
20
23
18
14
P/CEPS
29
14
13
10
8
P/BV
11
6
2
2
2
Dividend yield (%)
0
0
0
0
0
EV/Sales
2
2
1
1
1
EV/EBITDA
17
10
8
6
5
EV / Total Assets
2
2
1
1
1
Per Share Data (`)
EPS (Basic)
9
13
12
15
20
EPS (fully diluted)
7
10
12
15
20
Cash EPS
10
20
22
27
35
DPS
0
0
0
0
0
Book Value
24
38
100
112
127
Returns (% )
ROCE
30
30
15
18
20
Angel ROIC (Pre-tax)
36
37
25
32
39
ROE
28
23
11
12
15
Turnover ratios (x)
Asset Turnover (Gross Block)
3
3
4
3
3
Inventory / Sales (days)
72
64
55
49
43
Receivables (days)
91
102
107
93
81
Payables (days)
105
99
104
101
92
Working capital cycle (ex-cash) (days)
59
66
58
41
31
Note: Valuation done based on CMP as of May 25, 2018
May 28, 2018
11
Capacit`e Infraprojects | Initiating Coverage
Research Team Tel: 022 - 39357800
DISCLAIMER
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Disclosure of Interest Statement
Company Name
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or
No
relatives
3. Served as an officer, director or employee of the company covered under Research
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May 28, 2018
12
