Vascon Engineers rated buy by Kotak Securities

By: |
Updated: December 30, 2017 12:36:04 AM

Vascon Engineers Ltd (VEL) has presence in construction and development of residential and commercial real estate projects with a history of over 25 years.

Vascon Engineers, Kotak Securities, residential projects , commercial real estate projectsVascon Engineers Ltd (VEL) has presence in construction and development of residential and commercial real estate projects with a history of over 25 years.

Vascon Engineers Ltd (VEL) has presence in construction and development of residential and commercial real estate projects with a history of over 25 years. After having a rough patch between FY13 and FY15, the company has embarked on a decisive restructuring exercise. We feel the company could be a good turnaround story in FY19e with focus on affordable housing in both its EPC and real estate business.

The four-pronged strategy of turnaround is: (i) Focus on increasing the order book of EPC business. The company has capability to execute 8 million sq ft of projects/Rs 10 bn in value p.a. as compared to potential revenue of Rs 3 bn in FY18e. It has already increased its EPC order book from Rs 5.2 bn in Mar’17 to Rs 7.2 bn at the end of H1FY18; (ii) Reviving the real estate business under the new CEO of Real estate division, by focusing on affordable housing in a big way; (iii) Liquidation of non-core investments to the tune of Rs 2 bn in its subsidiaries & other businesses to fund future growth plans; and (iv) Exiting loss-making services business in its 85% held subsidiary called GMP Technical Solutions. This has the potential to swing PBT by Rs 100-150m between FY17 and FY19e.

On an overall basis, we expect revenue and earnings to grow at a CAGR of 26% and 231%, respectively, between FY17-20E. We expect 1257 bps improvement in Ebitda margins in FY17-20e. Based on the detailed working of individual businesses, we arrive at a SOTP price target of `60. We initiate coverage with a Buy recommendation.

 

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Over 25,800 online banking fraud cases reported in 2017, says government
2Canara Bank not to sell stake in AMC business
3Microsoft’s replacement app for usual lockscreen now in India