Vascon Engineers

 

 

At An EPS of Rs 6.71, Company is Valued At 20 Times Its Earnings & Looks Attractive

 

VASCON Engineers has been range bound since its listing early this year and has not been able to beat the market.

   Over the past five months, Vascon's performance on bourses has not been a great one either. For instance, it was down 7% in the past one month while both indices were up 10% each. Even in the past three months, the stock was down 12%.

   Vascon is present in western and southern regions. It recently launched a couple of residential projects, after its IPO and has received a good response to the same. Selling at an average price of Rs 3,500 per sq ft in locations like Nashik, Pune and Coimbatore, the company has clocked a lot of presales. It has also bagged some new EPC contracts and currently its order book stands at Rs 3,500 crore. The company's average size of EPC contracts has increased from Rs 30 crore to Rs 60 crore. Thus, with a smaller number of orders also, the company is expected to do well. As the company follows the project completion method, EPC will form a major proportion of the overall revenue of the company. For the year ended March '10, the ratio for real estate and EPC in total revenue was 20% and 80%, respectively, and for 2011, it is expected to be 30% and 70%, respectively.

   Out of the 115 crore of funds raised, the company has repaid Rs 40 crore of loan and the balance is being utilised as per the issue objectives.

   The company's net sales increased 47% for the year ended March 31, '10 at Rs 738 crore compared to Rs 502 crore clocked last year. The Pune-based builder has been able to cut down its operational expenses, thus, boosting EBIDTA margins by 70 basis points to 11.6% in the current year. Net profit margins have just doubled for the same period and are now at 7% at Rs 53 crore. Tax outflow was high on account of certain regulatory provisioning being done. Going forward, the company expects to maintain its current growth rate, despite having a high base.

   At an annual EPS of Rs 6.71 and current price of Rs 135.2, the company is valued at 20 times its earnings. It can't be compared to standalone contracting companies, as it has a significant exposure to realty as well. Thus, at the current level, investors can look at entering the stock.