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CD Equisearch
Capacite Infra (Buy)
CMP: ₹287.9
Target: ₹352
Capacite Infraprojects’ huge order book of ₹5,682 crore (4.2x of FY18 revenue) with an average project timeline of 3-3.5 years offers revenue growth of 21.8 per cent in FY19 and 19.5 per cent in FY20 respectively.
Developers and builders in Mumbai are in a sweet spot, with 3,700 hectares of land unlocked particularly in the outskirts of the city — 2,400 hectares allocated for affordable housing to meet government’s target of ‘Housing for All by 2022’ — under Mumbai’s new Development Plan 2034.
The Centre’s recent approval to increase 33 per cent carpet area of houses eligible for interest subsidy under PMAY-Urban to 160 sq m from 120 sq m for MIG-I and to 200 sq m from 150 sq m for MIG-II is expected to increase the number of beneficiaries and enhance construction activity, giving a boost to the housing sector in India. Yet, inadequate infrastructure demands scrutiny.
Buttressed by strong execution capabilities and healthy project pipeline, we expect net profits to grow at a CAGR of 25.9 per cent in two years ending FY20. Weighing odds, we recommend buying the stock with target of ₹352 based on 19x FY20e earnings over a period of 9-12 months (PEG ratio about 0.8).
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