Stock Review: ARSS Infra

 

ARSS Infra has had a strong presence in Orissa. They have had strong presence in railways, roads and irrigations. In railways, they have good profit margins. Recently, they have moved into the North East Region in Assam.

The margins there have been quite high as a very few contractor or players come in that region due to so many problems of executing work, mobilising infrastructure and machinery.

The company has recently entered into a public private partnership project (PPP) with Orissa Government for Bhubeneshwar Bus Depot. Its order value is about Rs 350 crore. The concession agreement of 36 years and their profits in lieu of the availability of the land development by construction of the bus depot will give them a very good benefit.

As of now, the order book of the company is about Rs 5800 crore, out of which only the PPP order of Rs 350 crore has been taken. For FY11, the company is likely to post a topline of close to Rs 1300 crore with PAT of around Rs 125 crore, or translating into EPS of close to Rs 85, which translates into PE multiple of 6.

Considering the order book positions and taking a call by discussions with the promoter and other players, they should be able to post a top line of Rs 1700 crore with bottom line of close to about Rs 185 to 190 crore, which will translate into an EPS of close Rs 125 for FY12. This will makes the share to rule at PE multiple of 4.

The renewed interest coming from the informed circle in the stock makes it move very fast by about 20% in couple of months' time. It won't be surprising to see the share move to about Rs 600 in the next couple of months. One should have these shares with a longer-term timeframe with a view of about 12 months, where the share price can move to about Rs 650 to Rs 700.