Unity Infrastructure Projects’ Q4FY08 results are ahead of expectations, with sales increasing 77% y-o-y to Rs3.2 billion against our estimate of Rs2.5 billion.
The company recorded a stable core EBITDA margin of 11.4% as compared to 11.5% in the same period last year. Since most contracts are covered under a cost escalation clause, the rising input prices have had a minimal impact.
We expect the core margin to rise to 12.8% in FY09 and further to 13.1% in FY10 as Unity focuses on new segments (micro tunnelling, urban infrastructure) and large value added projects.
Despite an increase in interest and depreciation during the quarter, PAT came in 32% ahead of our estimates at Rs202 million.
Unity currently has an order book of Rs31 billion with roughly 90% covered by cost escalation clauses and scheduled for completion over the next 30 months. These orders are well diversified among segments and geographies.
It has now trained its sights on BOT projects as well. With an established presence in civil engineering, irrigation and transportation, along with realty, Unity is successfully diversifying its business model.
We have an SOTP-based target price of Rs887 for the stock, at which Unity will trade at 10.6x on FY10E EPS. We maintain BUY recommendation.