11 th September, 2010 MAN INFRACONSTRUCTION …ans.accordhostings.com/UploadResearch... · 11th...

11th September, 2010

ANS Research Desk (Research Wing of ANS Pvt Ltd)

“ARHAM” Financial Centre

Harihar Chowk, RAJKOT (Guj)

Speak to: 0281 – 6699401

Drop a line to: [email protected]

MAN INFRACONSTRUCTION LIMITED

Research Team,

Bhaskar Patel

Pranav Mehta

Nifty 5462

Sensex 18167

Script Details

Equity 49.50 Crore

Face Value 10

Market Cap 1651 Crores

52 Weeks High/Low 408/284

6-month avg. volume 1242000

Shareholding Pattern As On Mar’10 (%)

Promoters 63

Corporate Bodies

Institutions

29

Public 8

Overview

Man Infraconstruction Limited

Mumbai. Man Infra has undertaken projects in six States viz. Maharashtra, Kerala, Gujarat,

West Bengal, Goa and Tamil Nadu. Man Infra provides construction services for port

infrastructure, residentia

company has executed significant onshore port infrastructure projects in the following ports in

India: Jawaharlal Nehru Port Trust, Mundra Port, Chennai Port, Vallarpadam Port and Pipavav

Port. Port infrastructure projects are complex and their execution generally requires strict

adherence to exacting international quality standards and tight timelines.

In the residential sector, the company works with real estate developers in Mumbai and

Maharashtra and is in the process of constructing a residential complex in the western suburbs

of Mumbai with an aggregate area of 1.95 million square feet, a slum rehabilitation authority

project in Mumbai consisting of the construction of a towns

feet and the construction of 5,166 tenements at a mass housing project at Pune

Man has been awarded an ISO 9001:2008 certification in July 2009 by SGS United Kingdom

Limited Systems and Services certification. Man Infra

Holdings Infrastructure Company Private Limited (Formerly

Limited) and Standard Chartered Private Equity (Mauritius) Limited having stakes of 9.2% &

6.9% respectively.

63%

29%8%

PROMOTER CB & INST PUBLIC

Recomm

BSE Code

NSE Code:

Overview

Man Infraconstruction Limited – is an infrastructure construction company headquartered in



infrastructure, residential, industrial and commercial and road infrastructure projects. The





In the residential sector, the company works with real estate developers in Mumbai and



project in Mumbai consisting of the construction of a township aggregating 5.16 million square



Limited Systems and Services certification. Man Infra currently has two PE investors SA (I)

Holdings Infrastructure Company Private Limited (Formerly


6.9% respectively.

Recommendation Horizon: Long Term (1-2 Years)

BSE Code: 533169 Bloomberg Code: MINF IN Curr

NSE Code: MANINFRA Reuters Code: MANI

an infrastructure construction company headquartered in



l, industrial and commercial and road infrastructure projects. The





In the residential sector, the company works with real estate developers in Mumbai and Pune in



hip aggregating 5.16 million square



currently has two PE investors SA (I)

Holdings Infrastructure Company Private Limited (Formerly - Sabre Abraaj Capital Private


Current MP: INR 337

Operational Areas

Port Infrastructure Man undertakes turnkey projects for multinational

conglomerates. Reclaiming land from the sea to facilitate construction of berths for ships to dock, building Container

Freight Stations, rail network, concrete paving works, electrical works, sewerage & drainage services, etc are some of the works carried out by it.

Residential Man Infraconstruction has mastered the art of constructing

good quality multi storeyed towers with the help of imported Aluminium shuttering materials (MIVAN Technology of Malaysia)

Commercial Man Infra construction is into construction of hotels, clubs, shopping malls, hospitals and schools and IT parks. From

core sector monoliths to heavyweights from the engineering and the service industries, Man Infraconstruction has carried out all works with singular distinction.

Industrial In the industrial sector, Man Infra’s services consist of the construction of manufacturing facilities such as industrial

factories and workshops Road Infrastructure In the road infrastructure sector, Man Infra provides following

services like earthwork, paving, sewerage, storm water

drainage, electrification, landscaping and arboriculture.

Client List

1). Adani Group 2). Bharti Airtel

3). DP World 4). D.B. Realty

5). Gateway Terminal India 6). Gujarat Pipavav Port Limited

7). Maersk India Pvt. Ltd. 8). Praj Industries

9). Simplex Infrastructure Ltd.

Mivan Technology

Mivan is basically an aluminum formwork system developed by one of the construction

company from Europe. In 1990, the Mivan Company Ltd from Malaysia started the

manufacturing of such formwork systems. Now a days more than 30,000 sq m of formwork

used in the world are under their operation. In Mumbai, India there are number of buildings

constructed with the help of the above system which has been proved to be very economical

and satisfactory for Indian Construction Environment. The technology has been used

extensively in other countries such as Europe, Gulf Countries, Asia and all other parts of the

world. MIVAN technology is suitable for constructing large number of houses within short time

using room size forms to construct walls and slabs in one continuous pour on concrete. Early

removal of forms can be achieved by hot air curing / curing compounds. This facilitates fast

construction, say two flats per day. All the activities are planned in assembly line manner and

hence result into more accurate, well – controlled and high quality production at optimum cost

and in shortest possible time.

In this system of formwork construction, cast – in – situ concrete wall and floor slabs cast

monolithic provides the structural system in one continuous pour. Large room sized forms for

walls and floors slabs are erected at site. These forms are made strong and sturdy, fabricated

with accuracy and easy to handle. They afford large number of repetitions (around 250). The

concrete is produced in RMC batching plants under strict quality control and convey it to site

with transit mixers. The frames for windows and door as well as ducts for services are placed

in the form before concreting. Staircase flights, façade panels, chajjas and jails etc. and other

pre-fabricated items are also integrated into the structure. This proves to be a major advantage

as compared to other modern construction techniques.

MIVAN aims in using modern construction techniques and equipment in all its projects. On

leaving the MIVAN factory all panels are clearly labeled to ensure that they are easily

identifiable on site and can be smoothly fitted together using the formwork modulation

drawings. All formwork begins at a corner and proceeds from there.

Source: Readers can get detailed information on the following website from which

this information has been taken.

http://www.architectjaved.com/mivanformwork/what_is_mivan_formwork.html

Industry Outlook

Port and Road Infrastructure

India has an extensive coastline of 7,517 kilo metres (excluding the Andaman and Nicobar

Islands). The ports and shipping industry in India have been in greater demand due to the

growth in imports and exports on account of India’s economic expansion. Indian ports handled

approximately 95% of the total volume of the country’s trade and about 70% in terms of value

(Source: Working Group Report on Shipping and Inland Water Transport, 11th Five-Year Plan).

MNC’S as well as Indian Players are increasingly looking at developing ports on the western,

eastern and southern coastlines to bank upon the huge opportunity that these coastlines

provide. The Road Infrastructure in India is still in very bad shape in most parts of the country

and there is ample scope for private companies to grab a piece of this huge pie. Going forward

Road Infrastructure will be required to be developed quickly and according to World Standards

if India has to continue its growth momentum.

Residential Segment

The economic growth in India is going to contribute to increasing income levels. This combined

with trends of higher urbanization and nuclear families will create greater demand for housing.

However going forward there may be increase in the general interest rates in the country due

to the persisting higher inflation which would lead to higher interest costs for home loan takers.

This may result in some decrease in the new housing demand. On the positive side the

government is continuously focusing on slum rehabilitation so as to provide housing facilities to

the poor people and has been increasingly inviting private players to execute the projects from

beginning to the end.

Commercial Segment

India’s rapid all round growth has resulted in more and more international companies setting up

their back offices in India while Indian firms are constructing more & more offices and

commercial properties at strategic locations so as to rapidly expand their businesses. The same

trend is likely to continue for next 5-6 years which would result in increasing demand in this

segment. Moreover with increasing growth levels in the country the disposable income of the

middle class is also going to rise and a good part of this income is going to be spent in

vacationing and

Malls etc. around the country.

Revenue Breakup

Total Revenues Earned = Rs. 573 Crores



vacationing and entertainment by them. This would require constructions of Hotels, Resorts,

Malls etc. around the country.

Revenue Breakup

Total Revenues Earned = Rs. 573 Crores for FY 2010

Source: FY 2010 Investor/Analyst Presentation

Residential, 354.10

Cr.

Commercial, 65.89

Cr.

PMC,

2.20 Cr. Infrastructure,

151.00 Cr.



entertainment by them. This would require constructions of Hotels, Resorts,

FY 2010


Revenue

Total Revenues Earned = Rs.

Residential, 85.99 Cr.

Revenue Breakup

Total Revenues Earned = Rs. 146 Crores for Q1 FY 2011

Source: Q1 FY 2011 Investor/Analyst Presentation


for Q1 FY 2011

Investor/Analyst Presentation

Commercial, 20.4 Cr.

PMC, 2.33 Cr.

Infrastructure, 37.37

Cr.

Order Book Breakup

Total


Order Book Breakup

Total Order Book = Rs. 1840 Crores as on March 2010



Road Infra, 36.80

2010


Commercial, 147.2Cr.

Govt. Residual 257.6

Cr.

Infrastructure, 55.2

Cr.Road Infra, 36.80

Order Book Breakup

Total

***The Total Order Book

March 2010 (i.e. Rs. 573 Crores) which gives good revenue visibility for the

for next 2 years.

Order Book Breakup

Total Order Book = Rs. 1954 Crores as on Q1 FY 2011

The Total Order Book (as on June 2011) for the company

March 2010 (i.e. Rs. 573 Crores) which gives good revenue visibility for the

for next 2 years.

Source: Q1 FY 2011 Investor/Analyst Presentation

Port Infra, 263.79

Cr.

Residential, 891.02

Cr.

Govt. Residential,

457.23 Cr.

Commercial, 332.18

Cr.

as on Q1 FY 2011

for the company is 3.4x its Net Sales for

March 2010 (i.e. Rs. 573 Crores) which gives good revenue visibility for the company

Investor/Analyst Presentation

Road Infra, 7.81 Cr.

FINANCIAL HIGHLIGHTS

1.

2.

3.

4.

0

200

400

600

800

1000

1200

NET SALES EXPEND PAT EPS

P & L COMPARISON

2008 2009 2010 2011 (E) 2012 (E)

FINANCIAL HIGHLIGHTS

*Provided that no equity dilution is done and number of shares remain the same.

1. Net Sales have shown a CAGR of 88% for last 3 years. The compa

growth face since last couple of years; hence the Net Sales growth

the low base effect. However going forward it might become difficult for the company to

achieve such high CAGR and so for coming 2 years we have taken a conservative growth

target of 44% and 35% CAGR respectively due to the higher base effect from previous year

We expect good growth in the Profit after tax for the company

2011 (E) and 2012 (E).

2. The expenditures have historically formed an average 77

the expenditure is due to Other Manufacturing Expenses (Subcontracted and

Services) and High Raw Materials Costs. Going forward we expect that the company is going

to reduced subcontracting and outsourcing work due to which its expenditure may decrease by

some basis points.

3. PATM % may reduce to 15.83% due to lowering of the CAGR. However it would still remain

high compared to many of its peers.

We expect that the company would continue to pay tax at 33% for next 2 years as well

Sources: ACE Equity, Company Reports

PROFIT & LOSS

Particulars MAR 12(E) MAR 11(E) MAR 10 MAR

Net Sales 1114.65 825.66 573.38 608.41

Other Income 22.29 16.51 12.65 7.33

Total Exp. 835.98 619.25 421.67 462.79

Op. Profit 300.95 222.93 164.35 152.95

Depreciation 29.53 21.87 19.10 15.55

Interest 7.95 5.90 4.17 2.51

Tax 86.94 64.40 48.03 48.45

PAT/ Net Profit 176.52 130.75 93.07 86.45

Adjusted EPS* 35.60 26.41 18.80 19.70

Div (%) N.A. N.A. 63.00 40.00

is done and number of shares remain the same.

The company has been in a fast

hence the Net Sales growth has been significant due to

going forward it might become difficult for the company to

for coming 2 years we have taken a conservative growth

due to the higher base effect from previous year.

in the Profit after tax for the company for the following 2 years i.e.

77% of the Net Sales. Most of

Other Manufacturing Expenses (Subcontracted and Outsourced

Going forward we expect that the company is going

ing work due to which its expenditure may decrease by

of the CAGR. However it would still remain

We expect that the company would continue to pay tax at 33% for next 2 years as well.

: ACE Equity, Company Reports, ANS Research

(CONSOLIDATED RESULTS)

(IN CRORES)

MAR 09 MAR 08 MAR 07

608.41 243.14 85.57

7.33 5.21 4.14

462.79 193.52 67.88

152.95 54.82 21.82

15.55 5.65 0.76

2.51 0.75 0.23

48.45 15.65 6.52

86.45 32.77 14.31

19.70 8.11 3.72

40.00 0.00 27.00

Financial Performance (Consolidated) for Q1 FY 2011

Particulars (In Crores) Q1 FY 11 Q1 FY 10 Var (%)

Net Income 146.19 111.10 31.6

Expenditure 110.90 72.29 53.4

EBIDTA margin 35.29 38.81 -9.1

Depreciation 5.29 4.35 21.6

Other Income 4.97 3.11 59.6

PBIT 34.97 37.57 -6.9

Finance Charges 1.37 0.56 144.8

PBT 33.59 37.01 -9.2

Provision for Tax 11.23 12.70 -11.6

Profit After Tax 22.37 24.31 -8.0

Minority Interest (0.47) 3.74 -

Net Profit 22.83 20.57 11.0

EPS (Rs.) 4.61 4.87 -5.3

Key Ratios Q1 FY11

ROAE (Annualized) 19.1%

ROCE (Annualized) 41.5%

Current Ratio 2.11

Debtors Days 56.90

Creditors Days 48.31

Balance Sheet Figures (As of June 30, 2010)

� Net worth of the company is Rs. 490.35 Crores

� Loans (Secured and Unsecured) were at Rs.13.04 Crores

� Cash & Bank Balance is Rs. 106.03 Crores

� Investments were Rs. 185.151 Crores

Source: Q1 FY 2011 Investor/Analyst Presentation, ANS Research

1.

2.

3.

4.

0

100

200

300

400

500

FUNDS DEBTS BV/SHR CONT. LIA

BALANCE SHEET

2007 2008 2009 2010

1. Man Infra’s Shareholder’s Funds have increased by over

due to the IPO which it launched in Feb 2010) while its Debts

negligible amount of Rs. 15 Crores in last 4 years. It is among a handful o

the Infrastructure space which are having a very low D/E ratio which has co

higher bottom-line for the company. Moreover such low D/E gives the company ample

opportunity to get financing for carrying out its operations and carry out its expansion

projects.

2. Net Current Assets for the company have increased mainly on the back of somewhat higher

Inventories, higher Cash & Bank balance and higher Current Liabilities

mainly consist of ‘Liabilities under guarantees’.

3. The Adjusted Book value per share has grown by 5 times over last four ye

The latest Enterprise Value for the company is Rs. 1532

Cap for the Company is Rs. 1650 Crores and its Reserves are Rs.

be noted that the company has negligible debt on its books and so its Enterprise

Value comprises mainly of its Market Cap - Cash on books.

Sources: ACE Equity, Company Reports

BALANCE SHEET (CONSOLIDATED

Particulars Mar 10 Mar 09 Mar 08

Total Funds 465 270 130

Total Debts 15.53 1.12 5.23

Net Block 92.91 84.32 48.17

Cash & Bank 130.46 104.89 24.23

Net Current Assets 258.68 186.68 27.39

Contingent Liabilities 225.67 147.59 55.66

Adjusted Book Value 94.12 61.50 31.91

over 554% in last 4 years (partly

while its Debts have increased by a

It is among a handful of companies in

the Infrastructure space which are having a very low D/E ratio which has contributed to the

Moreover such low D/E gives the company ample

opportunity to get financing for carrying out its operations and carry out its expansion

mainly on the back of somewhat higher

Inventories, higher Cash & Bank balance and higher Current Liabilities. Contingent Liabilities

over last four years.

1532 Crores while latest Market

Crores and its Reserves are Rs. 423 Crores. It is to

be noted that the company has negligible debt on its books and so its Enterprise

Cash on books.

Company Reports, ANS Research

CONSOLIDATED RESULTS)

(IN CRORES)

Mar 08 Mar 07

130 71

5.23 0.0

48.17 8.27

24.23 24.58

27.39 41.02

55.66 28.68

31.91 17.61

1.

2.

3.

-100

-50

0

50

100

150

Cash Flow

from operations from investing from financing

1. Cash from Operations have been positive continuously for past 4 years

company has been able to generate positive cash flows from its core operations by controlling

its Working Capital uses and achieving higher turnover and higher Profit

year.

2. Cash from Investments consists of purchase of Fixed Assets

Advances (for FY 2010). The company has used up cash for purchasing

as well as Other Fixed Assets.

Cash from Financing activities has mainly come from dilution of equity through IPO and Private

Equity placements. The company has not gone for taking Loans or issuing of

Bonds/Debentures to satisfy its financing needs for last 4 years.

Sources: ACE Equity, Company Annual

CASH FLOW (CONSOLIDATED

Particulars MAR 10 MAR 09

Cash From Operations 79.03 41.12

Cash From Investments -52.73 -41.31

Cash From Financing 130.10 56.50

Net Cash Inflow/Outflow 156.39 56.31

Opening Cash & Cash Equity 108.77 52.46

Closing Cash & Cash Equiv. 265.51 108.77

positive continuously for past 4 years showing that the

company has been able to generate positive cash flows from its core operations by controlling

its Working Capital uses and achieving higher turnover and higher Profit before Tax year after

of Fixed Assets as well as higher Loans &

used up cash for purchasing Plants & Machineries

mainly come from dilution of equity through IPO and Private

Equity placements. The company has not gone for taking Loans or issuing of

Bonds/Debentures to satisfy its financing needs for last 4 years.

Annual Report, ANS Research

CONSOLIDATED RESULTS)

(IN CRORES)

MAR 08 MAR 07

48.56 7.21

-80.17 -13.23

30.53 20.69

-1.08 14.67

24.58 1.34

24.23 24.58

1. The Company’s D/E is very low which is good from an Investor’s Perspective.

2. ROCE and ROE of the company have been increasing year after year except in FY 2010 mainly

because of the IPO due to which equity and capital employed have increased thus increasing

the base effect.

3. Net Sales Growth has decreased somewhat for FY 10 because a significant portion of contracts

had materials provided by clients on a ‘Free Supply’ basis which led to lower revenue booking.

However the PAT Margin (PBIDTM) has increased which suggests that the company has been

able to maintain its margins even while recording somewhat lower growth.

4. Free cash flow per Share has been positive and it has decreased in FY 10 mainly because of

increase in Number of Shares. Additionally Cash Flow per share has increased from previous

year even after taking into account the higher number of shares..

Sources: ACE Equity, Annual Report/Analyst Presentation

ANS Research

RATIOS (CONSOLIDATED RESULTS)

Particulars MAR 10 MAR 09 MAR 08 MAR 07

D/E Ratio 0.02 0.02 0.03 0

Current Ratio 2.52 2.20 1.25 2.25

Interest Coverage Ratio 34.88 54.83 65.47 92.57

PBIDTM (%) 28.66 25.14 22.55 25.51

PATM (%) 16.23 14.21 13.48 16.73

ROCE (%) 37.88 66.98 48.13 30.21

ROE (%) 25.3 43.35 33.32 21.13

Net Sales Growth (%) -5.76 150.23 184.15 N.A.

EBIT Growth (%) 5.72 179.45 133.47 N.A.

PAT Growth (%) 7.65 163.8 129 N.A.

FREE CASH FLOW RATIOS (CONSOLIDATED RESULTS)

Particulars MAR 10 MAR 09 MAR 08 MAR 07

Cash Flow Per Share 15.96 14.06 18.02 2.81

Free Cash Flow per Share 20.6 37.79 -11.82 7.21

Sales to Cash Flow 7.26 14.8 5.01 11.86

Z score

The Z-score formula for predicting bankruptcy was developed in 1968 by Edward I. Altman, a

financial economist and professor at the Leonard N. Stern School of Business at New York University.

The Z-score is a multivariate formula that measures the financial health of a company and predicts

the probability of bankruptcy within two years.

** Since Man Infraconstruction got listed in 2010 we have calculated Z score for previous 3 years

through a different formula for which Z>2.90 is considered in Safe Zone while Z<1.23 is considered

as Bankrupt.

• It divides companies into three zones on basis of Z score

Z > 2.99 -“Safe” Zone

1.8 < Z < 2.99 -“Grey” Zone

Z < 1.80 -“Distress” Zone

• Man Infraconstruction is in the safe zone since it is having very Low Debt and its Sales as well

as Net Worth have increased on a consistent basis year after year.

Source: ANS Research

PARTICULARS 2010 2009 2008 2007

T1 0.56 0.69 0.21 0.62

T2 0.13 0.27 0.24 0.09

T3 0.30 0.50 0.36 0.30

T4 9.09 1.69 1.10 2.02

T5 1.17 2.20 1.79 1.21

Z SCORE 8.45 5.17 3.73 3.50

REMARKS Safe Safe Safe Safe

Investment Rationale

Good Client Base

Man Infraconstruction has successfully completed Port Infrastructure projects for some very

reputed clients like the Adani Group, Maersk India Pvt. Ltd., Gujarat Pipavav Port Ltd. (an A.P

Moller Group company) etc in the past. Going forward the scope for Port Infrastructure

development is going to be very large in India due to the underdevelopment of port facilities in

the country. It is quite likely that the Port developing companies would call upon Man’s

expertise to build newer Ports in the future as well. Moreover Man has been able to get

repetitive business from its customers which also show their confidence in Man Infra’s project

execution capabilities.

Faster Project Execution Capabilities compared to others

Due to the use of Maven Technology the company has been able to execute its projects at a

faster pace than its peers due to which it has been able to finish its orders before the estimated

time period. This has resulted in the company getting repeat orders from its clients.

Presence of Private Equity Funds in the company for past 2 years

2 Funds namely SA (I) Holdings Infrastructure Company Private Limited and Standard

Chartered Private Equity (Mauritius) Limited are holding 8.2% and 6.1% stakes in the company

respectively. Both these firms have appointed 1 Investor Director each on the company’s Board

of Directors. Both these PE firms have bought in their experience and helped the company in

improving its Execution capabilities.

Debt Free Status of the company

Man Infraconstruction has near Zero debt on its books. Since Company is engaged in the Port

Infrastructure Development, Residential & Township Development and Commercial projects it is

a positive sign that the company has not over-leveraged itself and has sufficient room to go for

raising higher Working Capital Loans, if the need arises, in the future as well as Long term

loans without bringing too much pressure on its Balance sheet.

Investment Risks

Heavy Dependence on Residential Segment

Man Infra is heavily depended on revenues from the Residential Segment (nearly 62% of

the Total Revenues in FY 10). Moreover major part of its order book (nearly 73% of Total

Order Book in FY 10) also consists of orders from the Residential Segment. Such

dependence on a single segment may prove to be very dangerous for the company if this

segment faces some slowdown in the future.

Competition from New and Existing Players

India’s Infrastructure needs have got attention from major national and international

players. It is very likely that Man would be facing tough competition particularly in the Port

Infrastructure segment from other established companies. Winning of contract bids (both

private as well as public) may just become that much more difficult.

Recommendations

At current price levels of Rs. 337 the company’s stock is trading at a P/E of 18.24 for FY

09-10. Going forward we expect the company to achieve an EPS of Rs. 26 in FY 10-11 and

an EPS of Rs. 35 in FY 11-12 provided that there is no equity dilution. So at Current Market

price of Rs. 337 forward P/E for the company comes out to be 12.98 and 9.61 for FY 11(E)

and FY 12(E) respectively.

Now taking a conservative P/E of 16 for both 2011 and 2012 and EPS (E) of 26 and 35 we

expect the stock to reach a price of nearly Rs. 416 and Rs. 560 by 2011 and 2012

respectively.

Disclaimer: The information being provided to you is compiled from sources we believe to be reliable. ANS Pvt. Ltd cannot and does not take any guarantees

about the accuracy, reliability, validity or timeliness of the information and/or data provided/made available to you in this document. The views are purely

indicative. Neither ANSPL nor any of its associates, subsidiaries, affiliates, directors, and/or officials become liable or have any kind of responsibility for any loss

or damage that you may incur from any decisions taken by you based on our recommendations. None of the information contained herein constitutes a

solicitation from ANSPL to Buy and/or Sell securities and/or any Future, Options or Other Financial Contracts. Clients may exercise their own caution and double

check or verify the information contained in our recommendations.

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