MBL Infrastructures - Tempting Valuations

MBL is engaged in the execution of civil engineering projects. The Company provides integrated engineering, procurement and construction (EPC) services for civil construction and infrastructure sector projects. In recent years, MBL has executed and commenced a number of praiseworthy projects in 14 states of India. The Company has successfully completed the execution of the BOT project of 114 km long Seoni - Balaghat - Gondia State Highway (Madhya Pradesh), which is operational since February, 2008 and another project of 18.3 kms of Waraseoni-Lalbarra Road Project (Madhya Pradesh) is operational since August, 2015.

The Company has a large fleet of sophisticated equipment, including hot mix plants, sensor pavers, tandem rollers, soil compactors, stone crushers, loaders, excavators, tippers, motor graders, concrete batching plants, transit mixers, concrete pumps, dozers, cranes, etc.

  1.  MBL has over two decades experience in executing infrastructure projects as Prime Contractor and has established its ability to deliver quality jobs within budget and schedule.
    
  2.  MBL was among the first batch of contractors to be awarded the contracts of prestigious North South East West Corridor by NHAI and was the first to complete the project.
    
  3.  MBL was amongst the first batch of contractors to be awarded the contract for maintenance of National Highways by NHAI.
    
  4.  MBL was awarded the first ever contract for comprehensive maintenance of Inner & Outer Ring Road of NCT, New Delhi.
    
  5.  MBL has witnessed a Continuous Growth in Bid Capacity and Pre-Qualification Capability.
    
  6.  MBL has been judged as 2nd Fastest Growing Construction Company (Medium category) in India at 13th Annual Construction World Global awards and 3rd Fastest Growing Construction Company (Medium Category) at 10th, 11th and 12th Annual Construction World Global awards.
    
  7.  MBL has been judged among India’s top Challenger Companies in the Construction and Engineering value chain FY14 at 12th Annual Construction World Global Awards.
    
  8. MBL is the Winner of India’s No. 1 Brand Awards 2016 in India’s Best Infrastructures Company Category awarded by International Brand Consulting Corporation, USA.
    

The company have almost doubled its revenue from 1251 (2012) to 2314 (2016), however the margin have been under pressure falling from 5% to 3.67 in 2016.

Mutual funds and Institutions also have a stake close to 26%. Promoters are holding 49% stake. It has also been paying dividend continuously since 2012 at least.

During the year they had order inflow of Rs 3,600 crore odd and during the last quarter they had orders of Rs 3,149 crore.

They are a low geared organisation with low long-term gearing. Rs.125 crore of long-term borrowings on the standalone basis. If we take the working capital, the debt to equity ratio is 1.21. If we take the build, operate and transfer (BOT) projects, it is well within 2:1.

The company bagged orders worth Rs 3,190 crore in Q4 FY16, and a delay in their execution led to low EBITDA margins, said AK Lakhotia, Chairman and CEO. The profitability of these orders will be recognised in FY17, Lakhotia maintained.

The stock has recently corrected maybe due to incorrect interpretation of quarterly numbers. At 114 the stock is very cheap with expected EPS of at least 15-16 at the minimum.

I took a small exposure today, the stock represents 2% of my portfolio.

Views are invested from the ones tracking it more closely.

2 Likes

One thing I dont like about MBL Infra is the low profit margin. Not only is the profit margin low but it is falling quarter over quarter.

The Shareholding of the mutual funds has decreased dramatically in past 4 quarters.Almost all mutual funds have decreased their shareholding.
I found this from valueresearch.

2 Likes

Another thing I have notcied by looking at shareholding pattern is , The number of pledged shares is increased

3 Likes

Reason for fall in stock price was huge selling pressure from these funds. Major concern was increasing debt in the books as also can been seen by increase in pledging. Now the key question is whether there is enough margin of safety at this price level. In my view, yes after looking at recent orders and BOT project completion this year they should be in a position to de-leverage some by end of this year. Upside potential looks much higher than the downsides at CMP 115.

Discl. Minor investment

my guess is they might have increase debt for new project and which may require additional shares to pledge.
promoter has increase holding in last two quater which may help them.
this year they may complete major road project for which they had taken huge loan which may help in cashflow as well.

bikaner suratgadh rajasthan road expected to be completed by september may help in cash flow.

Any idea why it’s circuit down today?

Everyone is wondering why its lower circuit so does am i. one of explanation i received is pledge shares of promoter which is rising over a period which has such trigger.
Need to look at result which will be on 12 th sept. Hope some bse announcement will give us some idea on this.
i think they have road assets which they can monetise and resolve any burgeoning debt issue if any.

disclosure; minot investment in stocks may be biased towards it.

1 Like
1 Like

thanks Rahul… Pretty bad news and further downside until sep 12, i guess

Disc: Invested

i have seen on Money Control. Pledging of shares done by Promoters but it is not significant way. Companies Debt To Equity ratio at March 2016 is 2:1 hence for upcoming growth they might have pledged shares .

Valuation Ratios are very cheap
Further all the ratios seems very cheap like Mcap to sales is 0.14 .
PE ratio something 3.2

Good /Positive things are
ROE for last three years is 15
Company has got recently NHAI Projects so visibility of sales is there
Completion of BOT Projects by December 2016

I think Price below 70 shall be good entering point.
disclaimer : Not yet entered due to circuit . Will enter after some positive trend .

Query : Yesterday circuit filter was on 19 ~20 % and today 10 % . how this is getting changed for one company .

1 Like

is anyone 1 aware of govt tollroad moentisation scheme executed by any toll road company in india.
i guess best valuation calculation howmuch they can monetise with their toll road assets and then comparing it with their debt. this calculation may give more clarity if we assume company has serious debt issue

AS I AM INVESTED IN THIS COMPANY LOOKING FOR BIASED REASON TO JUSTIFY MY DECISION.
HERE IS SOME INFO.
SUBSIDIARY.
AAP INFRASTRUCTURE:
Project type Build-Operate-Transfer (BOT)
Commercial operation date 28th February 2008
Work area 114 km of the SeoniBalaghat-Gondia
stretch
on State Highways#11
and 26 km in Madhya
Pradesh
Estimated construction cost H10820 lakh
Concession period 15 year

FROM ANNUAL REPORT OF 205-2016.
HAVING AN ANNUAL TOLL OF 2015-2016 IS 22CR. RIGHT TO COLLECT TILL 2023.
WONT ANYONE GIVE LUMPSUM 100 CRORE TO THIS COMPANY FOR ABOVE RIGHT OF WHOLE ON SUBSIDIARY. THIS FUND WILL HELP THEM JUSTIFY ANY IMMEDIATE DEBT ISSUE.

I AM NAIVE TO FINANCIAL ANALYSIS BUT TRYING MY BEST TO JUSTIFY INVESTING DECISION.

I WILL WELCOME ANY COUNTER ARGUMENTS ON ABOVE AS I AM HERE TO LEARN .

PLEASE DONT CONSIDER ABOVE AS A REASON TO BUY THE STOCK OR AS A BUYING RECOMMENDATION.

MF are selling on governance concerns. No one knows why so much of debt on balance sheet plus pledged shares. Implies siphoning of funds as well as fudged nos. Monitor for any BG invocations.

Important point here is that, once promoter share goes down…it is beneficial for them if earnings and share price remain depressed. So that they can gain it back.

Howard Mark says remember for every trade there is a buyer/seller on other side who may happen to know more. Capital point rightly said this is an asymmetric trade. Seller knows more.

According to the annual report 2015-16. The revenue of the company from operational tool roads is 31cr, where consolidated revenue of company is 2342cr.

I could not find the details of projects completed and revenue booked by the company leading to the revenue of another 2300cr.

By end of this Fy 2016 theyn are going to complete 3 bot projects.

Revenue generated from these projects while EPC construction arm is inhouse.

I have bought a few at 115 (much higher price than CMP) so views can be baised…

I think the current downtrend is because of pledged shares been sold in the markets and the downtrend wont stop until the selling is done by them.
Now the selling could be due to Insider News which they have and we will get to know in the days to come.

So I am not adding at current juncture but may add if I get some positive news. (Pledge Selling is not a big problem until it is accompanied with Bad News or Bad fundamentals)

Did any body here attended the con call?