Unity Infraprojects –Buy- Sharekhan

Unity Infraprojects (Unity)’s performance in Q4FY2010 was above our estimates. The net profit grew by 31.5% year-on-year (y-o-y) to Rs27.7 crore on the back of an impressive revenue growth of 28.6% y-o-y to Rs493 crore. For the full year, FY2010, the revenue and the profit after tax (PAT) grew by 30.6% y-o-y and 22.2% y-o-y to Rs1,477 crore and Rs85 crore respectively.

The operating profit margin (OPM) declined by 27 basis points y-o-y to 12.6% in Q4FY2010 due to higher construction expenses in the quarter. However, on a sequential basis, the OPM sustained at the same level. For the full year, OPM improved by 32 basis points to 13% on account of a lower raw material cost. The company expects to maintain its margins at around 13%.

Unity’s current order book stands at Rs3,477 crore, a stellar growth of 29% y-o-y. The present order book has an execution period of 2.5 years and is 2.4x FY2010 revenues, and provides a strong revenue visibility. During the year, the company saw a strong order inflow of more than Rs2,150 crore. Further, the company is also L-1 bidder for contracts aggregating to Rs800 crore.

We remain positive on the company due to its growing order book and high operating margin. With Q4FY2010 performance of the company being marginally above our expectation and based on the management’s guidance, we are marginally revising our earnings estimates for FY2011 and FY2012. Our revised earnings per share (EPS) estimates now stand at Rs13.3 and Rs17.1 for FY2011 and FY2012 respectively. At the current market price the stock is trading at 7.7x FY2011 earnings estimate. We maintain our BUY recommendation on the stock with a revised price target of Rs151 as we roll forward our price/earnings (P/E) multiple to FY2012.

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