Dilip Buildcon - The best-in-class execution!

(Balusu Aditya) #118

(himanjim) #119

Subcontracting road projects to smaller firms an issue, but pure construction players such as Dilip Buildcon can cope.

(Amit Mehta) #120

DBL will be out of ASM from 2nd August 2018.

(Balusu Aditya) #122

Where did you get this information?

(Balusu Aditya) #123

(vikas sinha) #125

DBL L1 bidder for Coal mine operations.

DBL has received Provisional Letter of Award (LOA) by the Punjab State Power Corporation Limited (PSPCL) in relation to the contract for selection of Mine Developer cum Operator (MDO) of Pachhwara Central Coal Mine worth Rs. 32,156.04 Crores for a tenure of 55 Years.

In continuation with our announcement dated August 7, 2018 and in accordance with the provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, we are pleased to inform you that the Company has received Provisional Letter of Award (LOA) from the Punjab State Power Corporation Limited (PSPCL) in relation to the contract for selection of Mine Developer cum Operator (MDO) for development and operation of the Pachhwara Central Coal Mine in Rajmahal Coalfield, District Pakur, Jharkhand.

Total Order Book as on March 31, 2018 was: Rs. 23,888.10 Crores
Since then the Company has added new orders of: Rs. 35,937.44 Crores

Like some topshot said, DBL is the new and better LnT.

Disc: Invested.

(vikas sinha) #126

Today’s Board Meeting agenda:

(Raj) #127

Good results from all fronts.

Revenue, EBITA and EPS up QoQ and YoY. Rs 1 dividend declared

(himanjim) #128

Latest investor presentation

(Balusu Aditya) #129

DBL has been declared L-1 bidder for Bhopal Metro rail proiect, Phase -I, valued at Rs. 247.06 Crore by the
Urban Administration and Development Department Madhya Pradesh Metro Rail Co. Limited, Bhopal (M.P)

(himanjim) #130

Another project Nagpur-Mumbai Super Communication Expressway bagged. Market seems to be least interested though :anguished:

(shreyas1705) #131

The company’s shares have taken a beating since it hit the all-time-high earlier this year. This was arguably on account of rumors that centered around the CFO resignation. The management has tried to calm the investors ever since. But, the overall market sentiment has been sour owing to the macro economic concerns. This has been dragging the share price further down.

Given, the above background it provides a favorable entry point at this level.

But, below are my concerns

  1. The company has been very aggressive in bidding for projects. The management seems to have appetite for more debt although they say otherwise. Only recently the company has tapped fixed-rate NCDs. But, the majority (60%) of its borrowings is still term loan from banks which has floating rate of interest. The impending high interest rate environment is not going to bode well for the company. Inviting viewpoints on this front.

  2. I’ve been comparing KNR Constructions with Dilip for some time now. KNR follows a conservative approach to run their business. Dilip has an edge over KNR in terms of its better project execution capability and aggressive bids are definitely adding to higher order book. So, in spite of higher leverage I believe Dilip should command higher valuation multiples than KNR.

Now, my question is what’s the ideal multiple to value building construction players such as Dilip, KNR, Ashoka, etc.

A. If I were to look at PE(forward) or EV/EBITDA(forward), Dilip is still at ~14x and ~8x respectively, while KNR trades at ~15x and ~10x respectively. This reflects that Dilip has no edge over KNR.

B. But if you value it using PB, Dilip trades at ~3.4x and KNR trades at ~2.5x, which makes sense!

I request the fellow VP’ers to help me with this.

Disclosure: Not invested in Dilip, KNR or Ashoka. I have been tracking the sector for a while.

Also, this is only my second post on VP. Please excuse if I am coming across as naïve.

(skg) #132

Does anyone knows if there is any news on Dilip Buildcon? Stock is going down everyday. One of the reason i could think of is the election survery result which shows that bjp might lose in few states. I dont see any other bad news on it.

(atul1082) #133

Infrastructure cos may face funding scarcity

(Amit Mehta) #134

What would be the rationale for such an assumption?

With a A+ rating on long term loan and one of the strongest balance sheet in the industry and execution capabilities this would certainly be a black swan

Disclosure - Invested

(subrotobaul) #135

Could be any or all of the below:

A) election fears ( despite geographicallly diversified order book)
B) funding / debt mgt challenge in infra ( esp with ref to resolution 18 adopted in recent agm for default conversion of loan to equity )
C) unsettled trust issues despite mgt statements/ clarifications on sudden exit of CFO in may 2018
D) uncertainty in the minds of some investors on the shrem payout
E) recent news of MOA with IOC ( possible change in line of business )

Here is a recent public statement by the mgt on some of these issues :

(shreyas1705) #136

Valuation could be a concern too.

Dilip’s FY1 P/B stands at 2.2x even after the recent correction while KNRC FY1 P/B stands at 1.8x. Note that this is despite the lower leverage of KNRC (D/E ~0.7) vis-à-vis Dilip (D/E ~2.1x).

Well, this argument can be retorted given the better performance (margins and growth) of Dilip over KNRC and Ashoka. But, in the current market scenario I feel market is punishing all the companies that are highly levered. I wouldn’t be surprised if Dilip falls more in the coming days.

Disclosure: Not invested in Dilip, KNR or Ashoka

(Amit Mehta) #137

The business has an order book of 2-3x revenues, expected growth of 20-30% for the next few years. Huge demand, limited competition, capital efficient HAM model, strong balance sheet, strong and proven execution capabilities.

Expected net income of 1,000 cr for FY2019, market cap of ~7,000 cr — this looks like a steal at 7x FY19 PE. At this price all the corporate governance perception issues seems to be priced in. Market seems to be pricing in that Modi will loose election and new government will not build any roads for the next 5 years.

Technically the stock has been falling on low volumes and should bounce back quite sharply if buying comes in.

Disclosure - Invested and adding

(atul1082) #138

We should not underestimate the impact of corporate governance issues and then can never b measured in terms of price .Look at where pc jewellers and vakrangee and whole lot of other companies are there today.

(paraa) #139

Road building business in India will always be susceptible to governance issues as its open secret its almost impossible to operate in India without having good links to the political class.

Most of the companies(except may be L&T) have some kind of accusation or legal case going on.

Also this sector is often vulnerable to factors outside its control (rising interest rates,labour issues,land acquistion,liquidty in the system etc).

The only factor which the companies can differentiate in this sector is based on their pace of execution and their balance sheet strength to counter the tough times.

DBL so far has displayed exemplary execution and their balance sheet is relatively strong and have long pipe line of orders to execute.

However the market has some serious perception issues despite repeated management clarifications on them.

DBL needs to show very good growth without any governance issues for a few quarters for the market to start believing it again and investors need to be prepared accordingly.