Consolidated Construction Consortium is into providing integrated construction services such as construction design, engineering, procurement, and project management along with construction-allied services like mechanical and electrical plumbing. The company has presence in the industrial, commercial, residential, and infrastructure industry, the related aspects of the construction industry.
Of the total proceeds of around Rs 188 crore, the company intends to use around Rs 137.257 crore for acquiring equipment required in the construction business. It also plans to invest around Rs 67.98 crore for investment in its subsidiaries – Consolidated Interiors and Noble Consolidated Glazings. It plans to use around Rs 48.57 crore for its management and skill development centre.
Investonomics
The construction industry is growing at a 16% CAGR as well as its related sectors like estate and infrastructure have been showing an unprecedented growth. And herein a company like Consolidated Construction Consortium stands a good chance of milking the growth in these sectors, considering its concomitant presence in all these sectors.
The company?s businesses are contractual, which are low-margin businesses. Hence, expecting a company like CCCL to show up higher margins would be asking for too much. The company?s net profit margin for FY07 was around 5.4% and it actually hovered around at 2.5% in the last four years.
The company?s PAT and sales have grown at a CAGR of 96% and 61% respectively. A goal at hand for the company would be to bring in stability in revenues, and more importantly, post-stability in the sustainability of revenue growth. The construction-services-provider promoters are in the same business, which could create a conflict of interests. Also the spurt in the revenues of the company is a fact investors need to be aware of.
Valuation
On the valuation front, considering the fully diluted post-issue equity capital, the company quotes a P/E of around 36(x) and 40(x) at the lower and the higher end of the price band.
An immediate comparison with its peers like BL Kashyap and Sons, and JMC Projects, which quote a P/E of around 27(x) and 33(x) respectively, the scrip is high-priced. CCCL derives around 90% of revenues from South India and since the company intends to expand its presence, it is imperative that it bags bigger contracts. In the short-term, though it may demonstrate a decent performance on listing, it is crucial to look at the scrip in the long-term.
