Unity Infraprojects has announced an order inflow aggregating ~Rs400 crore. The orders include a Rs325-crore project from the Municipal Corporation of Greater Mumbai.
It involves the replacement of two pipelines and is executable over a period of 45 months. The company has also bagged Rs72-crore order from Central Public Works Department for the redevelopment of Dev Nagar in west Delhi.
With the strong order inflow, the company’s order book has grown to ~Rs2,800 crore, which is 2.5x its FY2009 revenues.
Apart from these orders, the company is the L-1 bidder for projects aggregating Rs1,100 crore. The L-1 bids consist of three to four bids. This clearly indicates that the average ticket size of the L-1 bids is ~Rs275-Rs370 crore.
The company is looking to diversify its order inflow from the transportation and urban infrastructure verticals.
Given the increase in the average ticket size of its orders, the company’s capital expenditure (capex) and working capital requirement would also increase going ahead.
To fund its capex and working capital requirement as well as to repay part of its debt, the company may raise funds through a qualified institutional placement (QIP) aggregating Rs220-Rs250 crore (the company has already passed an enabling resolution for a QIP up to Rs400 crore).
Going by the fund requirement of Rs220-Rs250 crore and assuming an earnings dilution of 5-15%, the QIP could be in the range of Rs405-Rs555 per share as per our sensitivity analysis.
We have not factored in any dilution from the likely QIP in our estimates due to lack of clarity on the QIP.
In view of the company’s ability to bag big-ticket orders and the order inflow of ~Rs400 crore seen by the company in the financial year till date (~28% of our FY2010 order inflow), we remain positive on Unity Infraprojects.
We maintain our BUY recommendation on the stock with a price target of Rs430. At the current market price, the stock is trading at attractive valuations of 6.4x FY2010 earnings estimate and 6.0x FY2011 earnings estimate.