Valecha Engineering - Rs.121.00

Valecha Engineering Limited (VEL) was promoted by Valecha Brothers as an entrepreneurial concern in 1957 and was converted into a public limited company in 1993. VEL specializes in construction of infrastructure, civil engineering works such as Highways, Airports, Flyovers, Bridges, Tunnels, Canals, Water supply schemes, Sewerage projects, Irrigation Dams, Storage reservoirs, Buildings, and foundation engineering with sophisticated pile drilling Hydraulic Rigs. VEL has entered into a number of technical collaborations as well as joint ventures with overseas companies bringing the latest technical know-how in executing the projects. The management team consists of qualified professionals with relevant experience and expertise to ensure a proper techno-economic feasibility of the projects undertaken to achieve the objectives without any time and cost overruns. This is backed by state of art technology and using the latest techniques in construction. The company also plans to go global and is in talks with a UAE / German company for Middle East projects and is in search of an active local partner over there.

Almost 70 per cent of VEL’s revenues come from execution of road projects. It is also the largest piling company in the country. Capital adequacy, appropriate equipment, expertise and past experience, track record of timely project completion are some of the requisites for pre-qualification. VEL has thus pre-qualified for Rs2700 cr. worth of works in the NHAI projects. The Centre’s thrust on investments in infrastructure with increased participation from the private sector comes as a major boost to VEL with its current order book swelling to more than Rs350 cr. The company still expects good orders in this fiscal and is very bullish about its future prospects for the next 5 yrs.

Financially, the company has a strong balance sheet with a low debt equity ratio of 1:1 compared to its peers. Moreover, as a promoter of Jyoti Structures it holds more than 10 lakh shares at an average price of Rs40 whereas the CMP of Jyoti Structures is around Rs 140. For the six months ending 30 Sept. 2004, it reported robust numbers with turnover increasing 47 per cent to Rs70.30 cr. whereas its NP increased by 44 per cent to Rs4.02 cr. With such large orders in hand, the company will do much better in the second half and is expected to report total revenue of Rs180 cr. with NP of around Rs10 cr. Due to its small equity of Rs4.50 cr., any small increase in profit will lead to a sharp increase in EPS. With an expected EPS of Rs22 in FY05, it discounts very cheap at a PE multiple of only 5. A strong buy at CMP, which can give minimum 50 per cent return in the next 12 months. Long term investors can expect much higher returns.