Madhucon Project’s (MPL) Q1FY2009 results were a tad below our expectations. The company recorded a 30.3% y-o-y growth in net sales to Rs285 crore (Rs219cr), as against our estimate of Rs333 crore.
MPL reported a decline in OPM to 12.5% (15.4%), which was above our estimate of 10.1%, primarily on account of a low raw material cost.
Bottomline de-grew by 11.5% to Rs13.1 crore (Rs14.8cr), which was in line with our estimates.
We believe that once these projects (BOT, Real Estate, Power and Coal) near completion, it would create a lot of value for MPL’s shareholders.
Further, our analysis suggests that the company would be requiring substantial funds (approx Rs500cr) over the next two-three years to meet its commitments, and there are high chances that the company would raise money for the same through an SPV, which, we believe, will create further value for shareholders.
This is particularly so as we believe that the current market cap doesn’t factor in MPL’s true value (including all its ventures).
However, we have conservatively valued the company’s ventures either through P/BV or valued the asset (read Real Estate) at market value rather than the developed one.
Adopting the SOTP methodology, we have arrived at a target price of Rs242 by assigning a PE of 6x FY2011E EPS of Rs25.7 to its Core Construction business.
The BOT and Real Estate businesses fetch Rs73/share and Rs15/share, respectively. Madhucon continues to be one of our top picks in the Infra space, and we maintain a BUY view on the stock.