Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Union Budget
Budget 2011-2012 Home
Industry Expectations - Budget 2011-2012
Industry Reactions - Budget 2011-2012
Budget 2010-2011
Budget 2010-2011 Home
Industry Expectations - Budget 2010-2011
Industry Reactions - Budget 2010-2011
Contributor's Corner
Bonanza Portfolio
Hemant K Gupta
Krish Bhatt
S A A R T H I
Trinity Investments
Exchange Information
BSE 2009 Holidays
NSE 2009 Holidays
Investor Guide
Depository & Dematerialisation
Grievance Redressal
Investor Guide
SEBI
Trading of Securities
Transfer of Securities
Your Rights
Budget 2009-2010
Budget 2009-2010 Home
Industry Expectations - Budget 2009-2010
Industry Reactions - Budget 2009-2010
Interim Budget 2009-2010 Home
Industry Expectations - Interim Budget 2009
Budget 2008-2009
Railway Budget 2008-2009
Industry Expectations - Budget 2008
Union Budget 2008-2009
Highlights of Budget 2008-2009
Summary of Budget 2008-2009
Industry Reactions - Budget 2008
IPOs
Current IPOs
Past IPOs
IPO Subscription
Mutual Funds
Gold Exchange Traded Fund
MF Unique Holding
Forthcoming Dividends
ELSS Schemes Comparison
Tax Plans
New Fund Offers
Research
Arbitrages
Equity
Market Whispers
Tax Planning
Home
Equity Linked Savings Scheme
Post Office MIS
9% GOI Senior Citizens Savings Scheme
8% Savings (Taxable) Bonds
Kisan Vikas Patra
National Savings Certificate
Public Provident Fund
Research

| More

The Pitch Report - Initiating Coverage: NESCO Ltd - BUY - TP Rs.611

Posted On: 2017-11-26 03:45:40

Established in 1939 as the New Standard Engineering Company Ltd (NSE), the company changed the name from New Standard Engineering Company to NESC0 Limited. This reflected in the company's transformation from a pure play engineering company to that of a diversified one:

- Today NESCO, formerly an engineering company, has emerged as predominantly a service company. At present, about 78% of its total revenues and almost all of profits come from two service business units viz., IT Park and Exhibition Centre. The company is also debt free and cash rich with net cash of ~Rs.5,000 million, which is 14%of its current market cap;

- The Exhibition segment holds the distinction of being the largest exhibition center promoted by the private sector in India. It is located in the heart of Mumbai, just adjacent to the Western Express Highway, which serves as an important arterial road transporting goods to and from the City;

- Currently NESCO has three IT Parks at Goregaon complex with total leasable area of 0.93 msf. NESCO's IT parks are home to marquee clienteles like BlackRock, HSBC, KPMG, MSCI, PWC, TCS, etc. The company is doubling its leasable space by setting up IT park 4 with leasable area of 1.2 msf (developable area: 1.7 msf) at an estimated capex of Rs.6,000 million;

- Both IT Parks and Exhibition Centre are inflation sensitive and hence, these business models assure quite steady growth in the incomes in the long run. NESCO's revenues as well as net profits have roughly doubled in the last 4 years;

- NESCO has diversified into food court business through its wholly-owned subsidiary, Nesco Hospitality Private Ltd. The company has commissioned two food courts and started food services within NESCO Complex with leading international and national food brands;

Major expansion to drive profit growth in future

The management proposed to invest Rs.15 billion for the expansion of IT Parks, Bombay Exhibition Centre and Nesco Hospitality. It has expressed its commitment to finance these expansions from own resources, without any borrowings, and to remain debt free.

In our vision, its land bank holds substantial intrinsic value

NESCO's enterprise value (EV) stands at Rs.31 billion (Market cap of Rs.36 billion minus cash of Rs.5 billion). Its industrial and service units are located on a land bank of around 70 acres on western highway in Mumbai. Going by the trend, we estimate the value of land in this area to be around Rs.1,000 million per acre which gives an intrinsic value of around Rs.70 billion. However, we are sticking to PE method as it is not likely to unlock value from the land bank as it is opting to expand both IT Parks and Exhibition centre in this complex.

Outlook and Valuation

The stock has got corrected by around 14% from its 52W High and is trading at 19x its FY2018E EPS of Rs.26.69 and at 16.8x its FY2019E EPS of Rs.30.16. Despite such cash and land bank, NESCO trades at 19x its FY2018 expected EPS. We expect its revenue and profits to keep growing consistently in future due to the nature of its business models. Hence, we initiate a BUY on the stock with a conservative target price of Rs.611/- which is 20x its FY2019E EPS.

Risk to View

Any possible severe deflationary trend in the Indian industrial economy could impact adversely its exhibition business.

Shares of NESCO LTD. was last trading in BSE at Rs.537.15 as compared to the previous close of Rs. 541.5. The total number of shares traded during the day was 20331 in over 667 trades.

The stock hit an intraday high of Rs. 556 and intraday low of 535. The net turnover during the day was Rs. 11111873.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Energy: 3QFY18E preview-expect a strong quarter
Telecom: Thoughts on Jio's latest price cut - Kotak
Initiating Coverage: Vascon Engineers Ltd - BUY - TP Rs.60 - Kotak
Initiating Coverage: Dilip Buildcon Ltd - BUY - TP Rs.1217 - Kotak
Brigade enterprises Ltd - Research Report - Rating - ACCUMULATE - Arihant Capital Markets
Jindal Stainless (Hisar) - Initiating Coverage - BUY - TP Rs.318 - Kotak
Consumer Products - Cautious: Quick look back at what worked in CY2017 - Kotak
VRL Logistics Ltd - Company Update - BUY - TP Rs.500 - Kotak
HDFC Bank board approves raising Rs.24,000 crore: Angel Broking
Talbros Automotive Components Ltd - Initiating Coverage - Buy - Kotak Securities
Shemaroo Entertainment Ltd - Q2 FY2018 Result Update Rating - NEUTRAL - Arihant Capital Markets
Bodal Chemicals Ltd - Result Update - REDUCE - TP Rs.176 - Kotak
Management Meet Update: Time Technoplast Ltd - ACCUMULATE - TP Rs.214 - Kotak
Petronet LNG - Company Update - BUY - TP Rs.285 - Kotak
FIEM Industries Ltd - Result Update - BUY - TP Rs.1203
Quarterly Market Outlook - Kotak Securities
Dollar Industries Ltd - Result Update - BUY - TP Rs.560 - Kotak
Infosys gets a new CEO and MD: Angel Broking
November Auto Sales Analysis: Angel Broking
NBCC (India) Ltd - Result Update - SELL - TP Rs.250 - Kotak
Bajaj Quadricycles, not enough to see a rally: Angel Broking
Sector Update: Infrastructure Sector - Kotak
Management Meet Update: Blue Dart Express - ACCUMULATE - TP Rs.4375 - Kotak
TRAI unequivocally votes for net neutrality: Angel Broking
KNR Constructions Ltd - Result Update - BUY - TP Rs.306 - Kotak
Dr. Reddy's gets EIR for Vizag Plant: Angel Broking
PNC Infratech Ltd - Result Update - ACCUMULATE - TP Rs.198 - Kotak
MRPL - Company Update - ACCUMULATE - TP Rs.138 - Kotak
AIA Engineering Ltd - SELL - TP Rs.1130 - Result Update - Kotak
Minda Industries (MNDA.IN) - Robust performance - CSEC Research
Karur Vysya bank (KVB IN) - Moderate loan growth, coupled with deteriorating asset quality - CSEC Research
Aksharchem India Ltd - REDUCE - TP Rs.680 - Result Update - Kotak
Voltamp Ltd - BUY - TP Rs.1248 - Result Update - Kotak
Shankara Building Products Ltd - BUY - TP Rs.1654 - Result Update - Kotak
Simplex Infrastructure Ltd - BUY - TP Rs.590 - Result Update - Kotak
MOIL Ltd - ACCUMULATE - TP Rs.265 - Result Update - Kotak
CHHOTA (to) MOTA ideas: Eveready Industries Ltd - BUY - TP Rs.522 - Kotak
Castrol India Ltd - Q2FY18 Result Update - Religare
Minda Corporation - Q2FY18 Result Update - Religare
Mold-Tek Packaging - Q2FY18 Result Update - Religare
The India Cements Ltd - BUY - TP Rs.223 - Result Update - Kotak
Tata Motors - BUY - TP Rs.514 - Result Update - Kotak
Ashok Leyland - ACCUMULATE - TP Rs.126 - Result Update - Kotak
Oil India Ltd - ACCUMULATE - TP Rs.381 - Result Update - Kotak
Sun TV Network - REDUCE - TP Rs.878 - Result Update - Kotak
Larsen & Toubro - ACCUMULATE - TP Rs.1337 - Result Update - Kotak
Voltas - ACCUMULATE - TP Rs.610 - Result Update - Kotak
Allcargo Logistics - BUY - TP Rs.205 - Result Update - Kotak
Mahindra & Mahindra - BUY - TP Rs.1604 - Result Update - Kotak
Motherson Sumi Systems Ltd - SELL - TP Rs.342 - Result Update - Kotak


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2018