Market Price Rs 87 (FV10) Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 225 crs Date: 2nd June 2016
Target : Rs 125 Time frame: 1 year
About the Company:
This Arvind company has completed completed 80 years of existence. For every 10 shares of Arvind, 1 share of Arvind Infrastructure was given to the shareholders. Arvind group has a lot of land bank in Ahmedabad and Bangalore. Given the excellent reputation of promoters , this real estate business will do well under the able guidance of Mr Kamal Singhal who is the MD of Arvind Infra and how was given the most enterprising CEO of the year by Golden globe Tiger Awards 2016. The company has plans to develop 9 million square feet.
The company has presence in Gujarat and Bangalore. The projects in Ahmedabad include Alcove, Parishkaar which are already ready. The ongoing ones are Uplands, Beyond Five, Citadel, Mega Estate, Mega Trade & Mega Park. Apart from Ahmedabad, the company has land bank in whitefields Bangalaore and the projects there are Sporcia, Expansia. Another recent one is at Jakkum ( Bangalore).
The company has is just listed in August 2015 and has reserves of Rs 117 crs , book value of 61 per share and total debt of Rs 90 crores. Equity of the company stands at Rs 25.82 crores which will go up to 31.52 crores after conversion of warrants after 18 months. In the year 2015, the sales was 56 crores and net profit was 10.98 crores and in year 2016 the sales was at Rs 110 crores and net profit of Rs 17.3 crores and EPS was 6.7
The current year we expect Sales of over 170 crores and Net profit of 24 crores and EPS will be close to 9.5 per share.
Promoters hold about 47% stake in the company and public holding is about 53%. A new preferential issue of warrants at Rs 88 is issued to Aura Securities. Promoters are pumping in excess of Rs 50 crores & the promoter stake will rise to 57%. The promoters have already paid Rs 12.5 crores and will pay the remaining 37.5 crores in 18 months or the money will be forfeited.
Comparisions to Peers:
Companies like Nila Infra is quoting at a 30 PE and more than double to Arvind Infra’s valuation. Even other companies like Anant raj industries are much more priced than Arvind Infra. Normally the Real Estate companies have high debt and PE is also between 25 to 30 as compared to Arvind Infra’s PE of 13 and debt to equity is just .62
According to the MD, the company has said about growth of 30 to 40% and the unbooked inventory stands at 342 crores which might not be booked in this year itself but in the next 18 months. EBITA margins are about 32% for the company and the guidance is to maintain them. The promoters high confidence to pump in big money makes this stock interesting.
The current rate of Rs 87, it has the potential to jump to 100 levels in the medium term and also reach Rs 125 in the next 1 year.
( Disclosure: The analyst has no direct holdings in the company as on date of issue being published but has family holdings in the company)
Sebi Registration No: INH000001717