Dilip Buildcon - The best-in-class execution!

(Rejinoldo) #1

DILIP BUILDCON - The best road contractor - A 25% grower in a messy industry.

I’ll put down whatever info I have collected about this business.

Best road contractor available in the country.

Current market cap - RS. 7700 CR
Current market price - 560 rs/share
Price / boomk = 5
P/E = 17 [ Reasonable valuation ]
OPM = 18 - 20%

ROCE = 18%
ROE = 18%
DEBT / EQUITY = 2.5 [ Slightly on the higher side ]

Total sales close to 6000 crore at 7-7.5% net margin [ net profit close to 450 cr] .

Bullish viewpoints :

  1. Growing at 30 - 35 % CAGR PER Annum

  2. Best in execution in the industry. [ 90% projects completed ahead ofschedule]

  3. Largest road contractor in the country.

  4. Very good order book. [19000 CRORE]

  5. Industry is turning around From an Avg road contruction rate of 10 km per day [ 2008] to 20 km per day in 2016 .Govt wants the no. to reach 35 km per day.

  6. The Company has grown from a single state contractor [MADHYA PRADESH] to a pan india contractor.

  7. Dilip is perfectly in control of the show : less than 5% of the job is subcontracted. Most of the peers like ashoka, pnc buildcon etc subcontract 30 - 50% of the project.

  8. Order book to revenue ratio at 3 which is an amazing no to have. Close to 20,000 crore of orderbook.

  9. Dilip has 0% stuck projects which is epic ! Industry avg is 22-24% . Companies like pnc, knr etc has as high as 40% stuck projects !!
    10 . Capex cycle almost done - close to 2000 cr. capex done in the last 5 yrs.

  10. Working cap cycle is improving from 400 days to 100 days [ as DILIP switches from pvt. projects to govt projects].

Topline and bottom line has grown at 30-35% % YoY for the last 3 financial year . and at least15% during the bad years [ 2011 - 2014]

Management and company background :
DILIP management is so far stain free to my knowledge.

Risks :
90% REVENUE IS FROM ONE SINGLE CUSTOMER - goi [Govt of india].
Heavy interest burden
Govt reducing infra spending.

Experts closely monitoring the company or industry pls contribute more info.
Looks to be an interesting business. A 25% grower in a messy industry.

PS : Share price grew 3x during the last 1yr.
Disclosure :- Invested.

(anand21) #2

Please remember these point before investing in dilip buildcon.

The promoter/s has very good connections with local BJP leaders.

(Rejinoldo) #3

How dilip buildcon was built . the stroy till date :

Dilip Buildcon is also getting its feet wet in other construction areas. The company is working on a Rs 160-crore project for the Bhopal Development Authority to construct lower income group housing, spread across a 40-acre site on the outskirts of the city. In the irrigation business, it plans to build canals and dams and has a Rs 773-crore order book in place. The company says that net margins in this business are around 8-9 percent.

Crisil estimates Rs 24,972-crore worth of national highway projects will be awarded in the next five years with about half being awarded in the EPC space.

For now, the company is well placed to capitalise on the surge in road construction. Its balance sheet has only Rs 2,100 crore in debt, much lower than its peers. (The debt has been taken mainly for BOT projects.) It has no toll risk on its books.

(Dhaliwal) #4

I am new on this forum but have been investing in stocks for last two decades.

I think this stock isn’t a value pick at the moment as it has already run up a lot. I would be cautious as the growth rate is quite strong compared to industry average. At times, maintaining this kind of growth rate becomes difficult.

The stock at P/E of 17 looks better than industry P/E average but you should also consider high profitability of the company. Even a single quarter of dismal growth can have a major impact on stock price.

I would wait for the stock to decline before investing. Overall, I see it as a good opportunity but at the moment, the stock seems overheated (like broader market).

(Atom) #5

As per the Consolidated Profit and Loss account for the year 2017 the Tax provided is Rs.14.45 crores whereas as per the Cash Flow statement the Tax paid is Rs.105.38 crores. The difference in the amount paid is to be clarified. Further the interest paid Rs.554.88 crores is added back in the Cash flow from operating activities and deducted from Investing activities. Even though the net effect is nil, this has the effect of increasing the cash flow from operating activities by this amount and since the interest payment is a regular operating expense why this is transferred to Cash flow from Investing activities. I am not aware of the Accounting guidelines in this regard.

(Mridul) #6

Interest paid is added back in PBT as it is a financing item and therefore it should not reduce the CFO. We add the interest paid in PBT to arrive at CFO and the same interest paid is deducted as a cash outflow from financing in CFF. This is a mere reclassification of interest expense from CFO to CFF. I am not sure why they would subtract it from investing activities.

(Balusu Aditya) #7

Guys. New here. But I would like to also discuss about IRB Infra in the light of Infrastructure companies. Can someone please compare these two and tell which is a better bet?

(Rejinoldo) #8


Am trying to understand why DILIP is still valued at 17 P/E in spite of being a 35% ++ grower.
Peers either being 10 - 15% growers / in bad shape still gets 14 - 17 P/E valuations.

What could be the reason. ?

PS : Ashoka is valued at 37 times earnings !!

(Abhishek Basumallick) #9

One reason could be that Dilip is a very aggressive bidder. This is a very long gestation business. Aggressiveness in bidding can ensure short term order book. Unless the ability to execute and everything goes as per the expectations of the company, there could be major setbacks.

Thinking back, that’s exactly what happened to the aggressive players in the Power sector (remember the Ultra Mega Power Projects?)

(ramanhp) #10

Not aware much of Dilip but rather would be comfortable with KNR constructions. They choose where to bid and which orders to pick. Healthy margin and financial viability is imp.

(Rejinoldo) #11

could one reason be the high debt in the books . As the debt reduces would the multiples increase. * just thinking loud.*

(Jinal) #12

has someone attended the con call of today

(Yushma) #13

Abhishek has answered the question. I would like to add…

Ashoka has a reputation on taking on only profitable projects with good IRR. Execution capability of Ashoka has been good so far. Further, Ashoka manages key stakeholders relation very well.

In case of Dilip, the execution has been good so far, but IRR of the projects are a bit low, hence the perceived risk of loss in case of adverse environment. Also Dilip has a good relationship with current stakeholder set which may not be true in the future.

([email protected]) #14

hi, by Ashoka are you referring to Ashoka Buildcon
the p/e is 16 (source - moneycontrol)

(Rejinoldo) #15

Screener shows 38 p/e …
True … that is 17 p/e for ashoka…

(Tarak) #16

Possibly because of High Debt in its books.

(paraa) #18


(zeeshan syed) #19

Dilip Buildcon CS.pdf (1.2 MB)
india cnstruction sector 2016.pdf (1.6 MB)

A very detailed research report on Indian Construction sector and Dilip Buildcon by credit suisse.


(harishm) #20

Thanks for this. If you have gone through the report already, could you paste some highlights from them too?

(saumya) #21

Just found couple of disturbing articles about promoters


Then in October 2012, the chief minister had to deal with the fallout of income tax raids on the offices and residences of his childhood friend, the billionaire builder-contractor Dilip Suryavanshi, whose wealth had grown exponentially during Chouhan’s rule.