Madhucon Projects Ltd - Rs 55.00
Established in 1983, Madhucon Projects Ltd (MPL), flagship company of Madhucon group is engaged in execution of infrastructure projects such as expressways and national highways, BOT toll roads, irrigation & water supply, bridges, flyover, dams, tunnels, spillways, canal systems, sewage treatment, railway projects and property development projects. In order to emerge as a diversified infra player and insulate itself from any potential slowdown in a particular segment, company has lately diversified into business of mining and power in a big way. Being one of India's leading EPC (engineering, procurement and construction) and BOT (build, operate and transfer) contractor, MPL is a leader in construction of highways and expressways. Infact it has built more than 500 km of highways in the golden quadrilateral road network. NHAI, State Highway Development Corp, Irrigation & CAD Departments of state governments, Hyderabad Urban Development Authority, Coal India, Konkan Railway, Indian Railways, IOC, etc are few of its major clients.
To facilitate concentrated working and fast expansion, company presently operates thru following diversified business verticals.
· BOT Toll based Project: At present MPL is executing four BOT toll based national highways of 330 KMs namely Agra-Jaipur expressway, Karur-Dindigul expressway, Trichy-Thanjavur expressway & Madurai-Tuticorin expressway. Out of these, the first two projects are near completion and are expected to commence operation shortly. The latter two is estimated to complete during FY10.
· Water Resources including Irrigation: Currently company is executing six irrigation projects in Andhra Pradesh and constructing one dam across Penuganga river in Maharashtra
· Highways / Flyovers / Other Infra projects: Under this division, MPL boast of having an order of constructing 220 km of national and state highway apart from few other infrastructure orders including one major flyover in Maharashtra.
· Energy: To derisk its revenue model, MPL has recently ventured into power segment and has notably bagged a single EPC order of nearly Rs 1000 cr from M/s Simhapuri Energy Pvt Ltd for setting up two thermal plant of 135 MW each in Nellore, Andhra Pradesh. The project has already been funded and plants are estimated to go on stream by 2010. Besides, MPL has entered into MOU with Jharkhand govt for setting up 1000 MW thermal power plant at total cost of Rs 4800 cr. It has also been awarded on BOOT basis two hydel power project of 165 MW at Etabu & 150 MW at Elango, both in Arunachal Pradesh.
· Mining: Another latest diversification by MPL is into coal sector. As of today, its subsidiary in Indonesia is busy operating 3200 hectors of coal mine in East Kalimantan. 1000 TPH crusher and automatic loading plant is under construction and expected to be completed by January 2009. So most probably company will being commercial production of coal in FY10 which will boost the revenue as well as profit next year. Moreover it has also started exploration activities in its second cola which is spread across 19,000 hectares of land in Sumatra, Indonesia.
· Building and Property Development: MPL is putting special thrust to accelerate the growth of this segment. It is in the midst of developing couple of commercial property with a total project cost of Rs 900 cr. It includes the construction of 4 Star hotel cum service apartments and shopping mall cum multiplex in 9 acres of land in Kukatpally, Hyderabad.
Presently, MPL has unexecuted order in hand of roughly Rs 4500 cr which is almost 6x times its FY08 turnover, thereby ensuring strong revenue visibility for coming years. On the segment wise, 35% order relates to Road i.e. highways and flyovers, 30% from Irrigation, 20 from power and balance 15% consist of real estate development. Company is also studying the overseas markets and keenly watching the developments with a view to make an entry into the world markets at an appropriate time. Meanwhile, as the net worth and capital requirement for BOT toll based project, power project & coal projects are high, MPL has recently transferred these divisions to a separate subsidiary called Madhucon Infra Ltd on arms length basis.
To meet the growing traffic NHAI has taken up implementation of National Highway Development Projects of over 24,000 kms, and govt is planning major investments for the dedicated freight corridors of over 2,700 kms of new railway lines which shall be coming up in western and eastern corridors. MPL has already taken major initiative to capitalize the opportunities which would accelerate the growth of the company. For FY09 company may report total revenue of Rs 1000 cr and profit of Rs 45 cr leading to an EPS of Rs 12 on current equity of Rs 7.40 cr with face value as Rs 2/- per share. Despite being a huge diversified infrastructure company its share price has been decimated to Rs 55 from high of Rs 870 Rs in Jan’08. Although funding its massive projects will be a challenge for the company, still it seems a good bet at current market cap of merely Rs 200 cr. Investors can buy as share price can double in 15~18 months.
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