Capacit'e Infraprojects

(Utkarsh Pandey) #56

IIFL initates coverage on Capacite. Target seems very conservative. I believe with healthy order book and capable management, we can see good returns in this counter over next few years.

Highlights of report:

  • Order book driven by marquee clients and repeat contracts

  • Current order book consists primarily of residential real estate projects(91%)

  • Large order book and healthy project pipeline provide growth visibility. High revenue growth visibility
    for next 3.5 years.

capacite.pdf (300.4 KB)

(1.5cr) #57

No no… I think they can hit arond 75-80cr this FY. Overall in Fy19 they should grow net profits to around 110-120cr and post that I think fy20 would be a strong year with net profits of 170cr plus. 170-180cr strong balance sheet, good mgmt they should claim a multiple of around 20-25 times FY20 earnings. If they do not deliver in the next two quarters then I belive that it would be time to exit. They are a growth investment and they will have to grow at 30% plus cagr to sustain valuations…

(vinay ambekar) #58

In their Q2 concal Capacite said that they were targeting 2200cr order inflow in fy18 of which 1800cr is done.balance will be done by mar 18. Current order book is about 5500cr. Another 400cr takes it to 5900cr. They said this will be approximately 3x their targeted fy19 revenues. Which means they will be about 1900-2000cr turnover co by fy19. That’s about 60-65% over fy17 ie about 28% per year mathematically. And they expect margin to remain more or less the same.

Discl. invested last week around 360 levels.

(vinay ambekar) #59

Apart from having to maintain revenue and profit growth to sustain valuations, i think their relatively higher roce also contribute to valuations and i am not fully clear on that.

how their roce levels are relatively so high and are they sustainable. in the concal someone got technical with interesting Qs about construction process and machines/material used which i did not understand. But it could be the reason for their relatively higher RoCE. I guess some construction expert could explain this.

RoA is also high. Why? One Interesting point was that after a project is completed they could refurbish some of their assets and lengthen useful life. I didn’t understand this but this is what the mgmt claims. So they don’t have to buy new assets everytime. The opposite effect is that mgmt could be over estimating the useful life and understating the depreciation which will result in higher profit.

(1.5cr) #60

All is good on mgmt forecasts. On Capacite I believe that we have taken on valuation risk. For multiple to sustain they have to deliver 30-40% CAGR net profits. If they do not deliver next quarter, they will move to my satellite. And If they fail the following quarter, I will be exiting. I will be trimming my position to around 5% from 8%. I see valuation as a risk should earnings not grow at those high levels. I prefer pushing money into my existing holdings KCP ltd. Mayur and a fresh entry into Jkumar who I think will grow quickly. I dont want to take more than 10% exposure to companies that are direct infra cos as believe that there are inherent risks with the nature of the business. So I will be happy holding holding capacite and jkumar at 5% each and average up as the story plays out.


Agree that growth is a crucial factor in determining valuation but disagree on the valuation risk. When they have marquee clients, longevity of the biz is not in doubt unless some new risks emerge. I will consider valuation risk when the industry is on top of the cycle with the best margins and we are paying high PE. Real estate industry is down and margins are depressed but it serves specialized market and have good longevity. As long as they have good return ratios and good clients they deserve 20 PE atleast. I think the growth has to come from asset turnover. They plan to invest 75cr/year and 300cr of additional sales/year could be possible as they said 4x is achievable going forward. I think RoE above 20% looks sustainable. No room for valuation to expand and returns will be from earnings growth

Disc: Invested

(1.5cr) #62

Assuming they do sustain a 20PE and they reach an optimistic figure of 170cr net by FY20 we would arrive at a valuation of 3400cr. Should the bull market continue we would arrive at 170x25-27= 4250-4590. So they really do have to post some very very strong numbers to sustain valuations. If they do post that type of growth they can command a higher multiple, but I think 20-25 is a reasonable long term multiple. We are expecting slightly more than doubling net profits over next 3 years. That too assuming they do 80-85cr net this year.


Sure, one needs to accumulate it on down days to generate better than 30% CAGR. It is discounting current earnings but when I look at NBCC and feel this could surprise us in the private sector real estate.

(1.5cr) #64

I dont even work on 30%CAGR. I work on 20-25% CAGR max. Even with those estimates I feel like capacite is expensive and has to deliver otherwise there is no way valuation will hold. Surely the market will discount order book for companies with execution like Capacite. But with an order book of 5500cr calculating net of 6% gives you a pat of 330cr. on current order book. Girik Capital had a meeting with mgmt recently. They use the canslim screener. They bet on big growth. Overall next quarter’s results should determine the outcome of the investment. If they deliver sub par growth then it is obvious that something is up… We must also understand that capacite is not in an attractive industry where they can claim high multiples…

(MHS) #65

(vinay ambekar) #66

i was a little surprised how/why the concal did not address relatively poor growth of Q1 fy18. am giving the derived numbers below:

i agree that valuations seem high and have been accorded due to the past growth rates and high roce’s. sustainability of these will be key to stock performance. currently, the company looks capable of doing so given sector tailwinds and past demonstrated execution ability.


H1 is always slow for construction work due to monson season in India and management hinted about this on sept con call that’s why you see Dmart store opening is always slow in first half of the year . We need to wait and watch q3 and q4 result to get the better sense of future direction.

(1.5cr) #68

They also faced Rera in may and before that demontisation. So I’m still bullish on them, however failure on the growth front next quarter and I will be off…


Original PE investor Paragon sold 3% stake to a new investor SocGen at 417. This is the same price IIFL gave as target price in their initiation report.

Disc: Invested

(1.5cr) #70

New mgmt interview with guidance of 1400cr revenue.
Sundaram has increased stake by 2% from open market taking their holding to 5%.
Girik Capital, IIFL and Ambit have met the mgmt in the recent past. Ambit Capital was reported on bse website on december 11th.

(1.5cr) #71

The mgmt arent angels, thats no secret. As long as paragon are still invested they will make sure that a certain level of governance is maintained. I understand that they sold a little bit of their stake to societe general. But theyre still on the board and hold a decent chunk of 9%. Great story, but the moment paragon exit, in my view one has to reconsider their position. Until then it seems to be a wonderful growth story in a raging bull market. I am slowly preparing myself mentally to take a 20% hit on my portfolio. As we could see a major correction. But I believe now, that staying fully invested is the right move as we dont know where the market will go from here. Timing the market is a no no.

(Umang Joshi) #72

Is capacite structure part of the same company? Its named here including the MD

“It is alleged that Sanjay Kulkarni, Managing Director of Capacite Structures, approached a middleman, Rishabh Agrawal, having good contacts with public servants for bagging the sub-contract.”

(Umang Joshi) #73

(MHS) #74

Capacite structures ltd:

Capacite infraprojects ltd: This thread

From the above sites addresses of Both companies are located in the same building different floors ???:weary:

(Umang Joshi) #75

And Kulkarni is founder of Pratibha Industries