Ramky Infrastructure Limited - Review

[sunil]

IndiaBulls Securities has the following Recommendation on the IPO of Ramky,

We value Ramky’s stock at Rs. 504, by using the DCF method (WACC of 14.8% and terminal growth of 5%), which offers an upside potential of 24% over the lower end of the price band and 8% over the upper end of the price band. We expect the Company to continue enjoying better margins over the average of its peer set (IVRCL Infrastructures & Projects Ltd., Nagarjuna Construction Co. Ltd., Consolidated Construction Consortium Ltd. and Simplex Infrastructure Ltd.) with an EBITDA margin and a net margin of 13.8% and 5.7%, respectively, as compared to an EBITDA and a net profit margin of 9.6% and 3.9%, respectively, of its peer set for FY11E. This is primarily attributable to its operating efficiencies and diverse order book . The issue appears attractive with a forward P/E of 13.1x at the lower end of the price band and 15.2x at the upper band for FY11E, as compared to the average P/E of 15.3x for FY11E for its peer set. Thus we recommend investors to subscribe to the issue.

[sunil]

Angel Broking has the following View on Ramky,

We have arrived at a SOTP Target Price of Rs495 for Ramky wherein we have assigned a P/E of 14x FY2012E EPS fetching Rs426/share for its standalone
C&EPC business in line with peers like IVRCL and NCC. We have valued Ramky’s investments in assets at 1.5x equity fetching Rs69/share, which is at a discount to asset owners like IRB and ITNL. However, our SOTP Target Price provides limited upside of ~6% from the upper price band. Nonetheless, we recommend a Subscribe view on the issue, as we believe that the company is well- poised to grow over the long term with the catalysts in place, viz. the company’s unique assets, which would give returns in years to come. Currently, with these assets at different stages it is difficult to assign a value to them.

[chetan]

HDFC Sec has the following Views on the IPO of Ramky Infrastructure,

The huge infrastructure spending in the country is expected to continue in the medium term and accordingly, provide huge growth opportunities for construction players. RIL also has a strong business position in the wastewater segment of the construction business and has a strong order book, which is well diversified across segments and geographical regions. Some of key concerns however are that RIL is an average player and faces strong competition in the construction business other than the water & wastewater segment. In the build-operate-transfer (BOT) road business, the company is relatively a new entrant, having completed only one project; therefore, its execution capability remains a key monitorable.

RIL has better OPM and NPM than its peers. But on a P/E or P/BV basis, the IPO price (especially the higher band) is not cheaper than its peers. The call is therefore on the industry performance and valuation given to it. While listing gains could be limited (except if the issue is priced lower than the higher band), investors bullish on the prospects of the industry could invest from a medium term perspective.

[chetan]

HSBC Analyst Supriya Madye has a AVOID Recommendation on the IPO,

Company has good order book in hand which provided earning visibility in near short term. However on valuation parameters, the stock is expensive compare to its peers on upper band of the issue price. At price of Rs 468, it is offered at P/E of 22.2x FY10 and P/ BV of 5.4x FY10. Hence Avoid.

[sunil]

Religare Analyst Ajay Kumar Srivastava has SUBSCRIBE recommendation with the following note,

Ramky Infrastructure had an order book size of Rs 74,317.09 million as of March 31, 2010, 3.42 times its revenue for the 12 months to end March 2010. As per the company, the one-third of the total outstanding order book can be translated into revenue this year on a conservative basis. The company bagged
additional orders of Rs 3, 1470 million in the quarter ended June 2010. The proceeds of the Issue are intended to be deployed to a) Investment in capital equipments; b) to meet the working capital requirements; c) repayment of loans; and d) general corporate purposes.