Views of Mr. Jaikishan J Parmar(Research Analyst - Mid-Caps, Angel Broking):
Capacit'e Infra Projects Ltd (CIL) is a fast growing construction company in India. Residential constitutes more than 90% of the company's Rs. 4,602cr order book. It caters to established realtors such as Kalpataru, Wadhwa group, Oberoi Construction ltd, Lodha, Rustomjee and Godrej properties.
Large order book with marquee client base provides revenue visibility: CIL's current order book stands at Rs. 4,602cr (Rs. 4,146cr from residential segment, Rs. 442cr from commercial segment and remaining from institutional). This gives CIL a revenue visibility for the next 4 years. It order book mainly consists of high rise buildings (50% order book comprises of high rise buildings).
Focused approach to strengthen position: CIL was incorporated in August 2012, and despite being a young player, the company has been able to grow its revenue from a scratch to Rs. 1,157cr within 4 years, largely owing to management's focused approach on the residential space (high rise) and presence in top 7 cities. This segment has less competition and lately there has been a dearth of delivery focused contractors mainly owing to leveraged position. This led CIL to report above average EBITDA margin of 13.7% and RoCE of 33% in FY2017.
Expansion into cities to thrust revenue growth: Post implementation of RERA (Real Estate Regulatory Authority), a contractor who delivers on time would get large chunk of orders. Hence, CIL's decision to expand in cities with high growth prospects would further assist revenue growth. Moreover, the company is experienced in executing large projects, which would help it to bid for mass housing project by Government (Housing for all by 2022).
Track record of healthy financial performance: CIL has reported revenue CAGR of ~74% over FY2014-17. On the bottom-line front, the company has reported CAGR of ~157% over FY2014-17. Return on equity has also improved 536bps over FY2014-17.
Outlook & Valuation: Considering, CIL's experienced management, revenue visibility, strong track record of timely delivery of projects and strong relationships, we believe that CIL would continue to gain incremental order inflow going ahead. At the upper end of the price band, the pre-issue P/E works out to be 18.6x FY2017 earnings, which is lower compared to P/E multiple of its peers i.e. Ahluwalia - 22x, PSP 32x. Moreover, post RERA, a contractor with strong track record of timely project delivery would garner major order. Hence, owing to all the positive factors, healthy return ratios we rate this IPO as "SUBSCRIBE".