Hindustan Construction Co. Ltd’s (HCC) shares rose by around 2% on Wednesday and closed at Rs135 as it won three contracts worth Rs2,860 crore from the National Highways Authority of India. The three orders, like all its other projects, will be executed under one of its units, HCC Infrastructure.
With these new contracts, the firm’s order book stands at around Rs16,000 crore, which is about four times analysts’ projected revenues for the fiscal. Until the first half of this fiscal, HCC’s order inflows were a matter of concern, as they dropped by around 60% compared with a year ago, while its peers such as Nagarjuna Construction Ltd and IVRCL Infrastructure and Projects Ltd showed a growth.
While the return of big orders is a positive development, much depends on timely execution. HCC’s losses from the Bandra-Worli Sealink project have dragged down profits. Analysts point out that HCC’s growth has lagged its peers in the last three years on revenues and profits.
For the December quarter, its revenue inched up by around 9% over the year-ago period to Rs900 crore. Sequentially, revenues were up around 13%. Interest cost at 6% of revenues was slightly lower on a yearly basis.
But again, delays in project execution led to lower operating profit, which dipped by around 4% to Rs100 crore. Net profit, too, was down by about 37% at Rs15 crore. This has taken a toll on the HCC stock, which has underperfomed the Nifty in the last one month.
The current share price of Rs135 leaves little room for appreciation, given that the forecast earnings per share of Rs4.50 for 2009-10 is discounted around 33 times and 2010-11 expected earnings of Rs6 per share are discounted about 23 times.
Write to us at email@example.com