Stock Analysis on Man Infraconstruction Ltd (MICL)

April 29, 2024

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Man Infraconstruction Ltd. – A key player in infrastructure development

Man Infraconstruction Ltd (MICL), established in 2002 and headquartered in Mumbai, is an integrated EPC (Engineering, Procurement & Construction) company renowned for its expertise in various construction segments. With a track record of delivering landmark projects across India, MICL is particularly recognized for its superior quality construction and timely project delivery in the real estate sector.

Product Portfolio of MICL

Port infrastructure: Onshore container terminals, land reclamation, operational services.
Commercial & Institutional Constructions: IT parks, office complexes, hotels, malls, schools, hospitals.
Road constructions: Earthwork, paving, electrification, landscaping.
Residential Constructions: High rise buildings, townships, luxury villas.
Industrial Constructions: Factories, cold storages, warehouses, manufacturing units.

Subsidiaries: 17 subsidiaries, 3 associate companies, and 1 joint venture as of FY23.

Growth Strategies of MICL

Diversified business model encompasses Engineering, Procurement, and Construction (EPC) alongside Real Estate Development.
EPC segment generates income from infrastructure projects like ports, institutional buildings, and residential projects.
Potential for additional income through Project Management Consultancy (PMC) fees.
Emphasis on an asset-light approach through subsidiaries, joint ventures, and associates.
Upcoming projects include ultra-luxurious residential ventures in Mumbai and redevelopment projects.
International expansion with investments in the US market, including projects in Fort Lauderdale and Miami.

Financial Highlights of MICL

Q3FY24 Performance

Revenue: Rs.242 crore, reflecting a 47% decline compared to Q3FY23.
Operating Profit: Recorded at Rs.103 crore, marking a 20% decrease from Q3FY23.
Net Profit: Stood at Rs.87 crore, with a marginal 4% decline.
Noteworthy Improvement: Operating profit margin increased to 43%, and net profit margin rose to 36%, up from 28% and 20% respectively in Q3FY23.
Quarter-over-Quarter Growth: Compared to the previous quarter (Q2FY24), revenue increased by 13%, operating profit surged by 61%, and net profit improved by 34%.

Financial Performance (FY20-23)

Compound Annual Growth Rate (CAGR): MICL has achieved a commendable revenue and Profit After Tax (PAT) CAGR of 24% and 31% respectively over the period from FY20 to FY23.
Return on Equity (ROE) & Return on Capital Employed (ROCE): The average 5-year ROE and ROCE stand at around 14% and 18% respectively for the FY18-23 period.
Strong Balance Sheet: MICL boasts a robust debt-to-equity ratio of 0.18, indicating a healthy financial position and efficient capital management.

Industry Outlook

The infrastructure sector remains pivotal for India’s economic advancement, spearheading comprehensive development initiatives.
Government focus on policy implementation ensures the time-bound creation of top-tier infrastructure, driving economic growth.
The construction market is poised to expand significantly, expected to reach US$ 1.42 trillion by 2027.
Urbanization trends indicate a burgeoning demand for housing, with an estimated 600 million urban dwellers by 2030.
Infrastructure development acts as a catalyst, fostering growth in ancillary sectors like townships, housing, and construction projects.
Robust growth is forecasted, with a projected CAGR of 17.26% during the 2022-2027 period, signaling ample opportunities for sectoral expansion.

Growth Drivers

Government initiatives like the National Infrastructure Pipeline and Make in India.
Budget allocation of Rs.10 lakh crore for infrastructure.
100% FDI in completed construction projects.

Competitive Advantage

Compared to competitors like Macrotech Developers Ltd, NCC Ltd etc, MICL has the following advantages:

Superior undervalued stock with consistent sales growth.
Effective utilization of capital compared to competitors.

Outlook

Indian real estate sector expected to grow to $1 trillion by 2030, comprising 13% of India’s GDP by 2025.
MICL poised for growth with a real estate sales visibility of Rs.12,000 crore from FY24 launches and upcoming projects.
Niche in redevelopment and cluster projects promises better returns on capital.
Track record of delivering projects ahead of schedule with superior quality and execution.
Active addition of new projects with faster completion pace and ongoing project fund raise.
Series of projects slated for launch next year, including Pali Hill, Kala Nagar, Marine Lines, Ghatkopar, Dahisar, and Goregaon.
Holding a substantial EPC order book of Rs.1,047 crore, indicating a robust pipeline for future revenue.

Valuation

Favorable economic fundamentals and positive consumer sentiments driving real estate sector growth.
MICL’s healthy balance sheet and expanding order book indicate steady growth potential.
BUY rating with a target price of Rs.254 30x FY25E EPS.

Risks

Geographic concentration in Mumbai and MMR may lead to sales impact due to delays or inventory accumulation.
A rise in input costs and regulatory changes could affect margins and cash flow.