This is an ‘odd’ counter, or rather an ‘unnoticed’ company, which has hardly ever been spoken about in the media or by the analyst fraternity. This small cap stock may be unheard to many, even to those who have been in the market for long now. However, its fundamentals look very promising.
Eldeco Housing and Industries, a 30 year old company from Uttar Pradesh, is a leading real estate company, operating in the residential, commercial and industrial construction space, in North India. In Uttar Pradesh, it enjoys leadership position in the cities of Lucknow and Kanpur.
The Eldeco group, having executed over 150 real estate and construction projects till date, is currently developing 30 projects in Noida, Greater Noida, Faridabad, Gurgaon, Sonepat, Panipat, Ludhiana, Jalandhar, Neemrana, Lucknow, Kanpur, Panchkula and Sitarganj.
The company primarily undertakes construction of mixed use townships in the low income to mid-income groups (LIG and MIG). Being an old and well respected name in Lucknow, its projects receive good market response, immediately upon launch.
And also thanks to the goodwill which it has built and maintained among its customers, the geography of UP is very much captured by the company. Growing influx of population from East UP into Lucknow further supports the company’s growth.
Equity (30-6-16) is tiny at Rs. 1.97 crore (FV Rs. 10 each), of which, promoter holding is at 55.20%. There is nil institutional holding in the stock, but 3 HNIs hold 4.79%, leaving balance 40.01% in the hands of 2,000 retail shareholders.
For FY16, consolidated revenue more than doubled to Rs. 141 crore, from Rs. 54 crore in FY15. This led to EBITDA tripling to Rs. 36 crore, from FY15’s EBITDA of Rs. 12 crore. Thus, EBITDA margin improved 260 basis points to 25.6%, which is highly commendable.
After reporting consolidated net profit of Rs. 6.5 crore in FY15, its FY16 consolidated net profit jumped to Rs. 20.5 crore in FY16, translating into EPS of Rs. 104, on tiny equity of less than Rs. 2 crore.
The company enjoys an uninterrupted dividend paying record since inception – a feat which very few Indian companies can boast of, and definitely commendable for a real estate business, given its cyclical nature. For FY16, it rewarded shareholders handsomely, with a dividend of Rs. 10 per share.
Company has so far been announcing consolidated results only at the year end. Only since Q1FY17, has it started publishing consolidated earnings on a quarterly basis. However, consolidated earnings are extremely important, as the share of subsidiaries and associated not only increases revenue, but they also earn better margins.
For the first quarter of FY17, company’s consolidated revenue stood at Rs. 55 crore and EBITDA at Rs. 15 crore (28% EBITDA margin). Net profit came in at Rs. 9 crore, vis-à-vis FY16 net profit of Rs. 20.5 crore. Thus, the going has been simply superb for the three months ended June 30, 2016, wherein half of last year’s performance has already been achieved (despite FY16 also reporting over 100% YoY growth).
Consolidated Q1FY17 EPS for Eldeco Housing stands at Rs. 46. On a standalone basis, company has reported Q1FY17 revenue of Rs. 45 crore, EBITDA of Rs. 12 crore and net profit of Rs. 6 crore.
As of 31st March 2016, consolidated net worth stood at Rs. 88 crore. Company has total debt of Rs. 53 crore, all of which is short term in nature, to finance working capital needs. Consolidated balance sheet has cash and bank balance of Rs. 85 crore, which translates into net surplus cash per share of Rs. 164. A real estate company having surplus cash is indeed a rare phenomenon.
Encouraged by the excellent first quarter results, FY17 estimated EPS is seen close to Rs. 185 per share. Based on the current share price, the resultant PE multiple is only 3.7 times, on current year’s earnings. If we were to exclude net cash on hand of Rs. 164 per share, the resultant PE multiple works out to only 2.8x.
On topline of Rs. 200 crore, and net profit run rate of Rs. 36 crore, company’s market cap is only Rs. 134 crore, while enterprise value is just Rs. 102 crore making it a screaming buy. However, being a small cap stock, members are requested to not go over-board with respect to the exposure to this stock.
Disc: Have holding Stock.