Madhucon Project - Rs.209.00

Incorporated in Mar.'90 as Madhu Continental Constructions Pvt Ltd, this 14yr old Hyderabad based company is engaged in a diverse range of construction business and turnkey activities like building construction, deep excavation, heavy rock cuttings, high railway embankments, major canals and earthen dams, dykes and tunnels. It was promoted by N Seethaiah and N Krishnaiah and all the clients of the company are Central or State governments, public sector undertakings and other government or semi-government bodies. The company has successfully completed the widening of 57.21 km. National Highway 5 (NH5) project in the Tada-Nellore Section ahead of schedule. It has also completed NH-76 project in Rajasthan between Chittorgarh-Mangalwar five months ahead of schedule. The strengthening of the road having 4-lane dual carriage in the Tuni-Anakapally section on NH-5 in Andhra Pradesh is progressing well. The rehabilitation, upgrading, 4 laning project of 52 km of the Tambaram-Tindivanam Section of NH-45 in Tamilnadu is also progressing as per schedule. The construction of the Ahirkheda Tunnel of the Indira Sagar Project and the construction of a dam in Shivpuri, Madhya Pradesh, is planned to be completed during 2004-2005.

Recently, the Government of Maharashtra has issued a Letter of Intent for construction of a dam across the Penuganga River costing Rs.110 cr. The company has received an order for construction of MP State Highway corridor project costing Rs.62 cr. and is short-listed in a build-operate-transfer (BOT) National Highway project costing Rs.250 cr. floated by the National Highways Authority of India. Currently, Madhucon has an order book of Rs.500 cr., which it plans to complete in less than 15 months. It specialises in roads and huge contracts are in the pipeline since 85 per cent of the 7300 km road length that comes under the North South-East West corridor road projects are still to be contracted. It has also pre-qualified in bidding for projects worth Rs.7,000 cr.

For FY04, sales increased 30 per cent to Rs. 301.40 cr. but NP was almost flat at Rs. 19.40 cr. registering an EPS of Rs.38. For Q1FY05, sales and NP were marginally down to Rs.94 cr. and Rs.5.90 cr. respectively. Based on the works under execution, orders in hand, delivery schedules committed to and the tenders it is participating in, the company could register total revenue of Rs.360 cr. with NP of Rs.25 cr. resulting in an EPS of Rs.50. Given its small equity of Rs.5.07 cr. and huge reserves of Rs.67.30 cr., it is a strong bonus candidate as well. Although the stock has run up very fast recently, still at CMP of Rs.209 it quotes at a PE of just 4 signifying its strong upward potential. It could give 50 per cent appreciation in 12 months time and real long-term investors can expect much higher returns. Buy and add on declines.