Stock Review: BL Kashyap

 

 

Robust Order Book Of Over 4,000 Crore To Keep Show Going For Co In Long Term

 

MID-SIZE construction firm BL Kashyap & Sons has seen its stock price shoot up 22% in the past three months bucking the 8% decline in ET Construction Index due to continuous flow of fresh orders in the first five months of the current fiscal year.

   BL Kashyap (BLKL) is focused on civil and industrial construction with most of its projects in the North and the South. Its business mix is almost equally split between real estate construction and industrial projects. It caters to both the government and private sector.

   Besides construction, it is also into furnishings business through a subsidiary that provides allied services for office buildings and residential complexes. However, it is a small contributor to revenues.

   The company had an order book of 4,000 crore as of June 30, four times its

FY10 revenues. These orders are executable within next two to three years and give reasonable revenue visibility for the company's growth in the medium term.

   The firm had relatively comfortable debt-equity ratio of 0.87 as on March 31, 2010, much lower than the average 1.1 for other mid-size construction companies.

   BLKL posted a robust 40% increase in revenue for the quarter ended June, 2010, compared to a modest 2% rise in the three months ended March. This was led by execution progress on its ongoing projects and monetisation from realty projects. The firm also reported 30% increase in the net profits despite its interest cost doubling against the corresponding period of the previous year.

   The company has been seeing erosion in its profits over the past two financial years. It now appears to have passed through the bad phase and appears better placed to grow its earnings from here on.

   At the 12-months trailing earnings per share of 21.5, BLKL stock is trading 18 times its earnings. This appears on the higher side compared to peers such as JMC Projects and Ahluwalia Contracts, which are trading at 8.3 and 16 times earning multiples, respectively. However, investors may consider taking exposure to BLKL for the long term, since its earnings growth is likely to kick-in from here on.