Buy This Small-Cap Infra Stock For Robust 52% Potential Returns, Recommended By HDFC Securities

HDFC Securities is bullish on Dilip Buildcon Limited; it suggests buy the stock of the company for a target price of Rs 369 apiece. According to thr brokerage's estimated target price and the Current Market Price, the stock is likely to surge 52% in 12 months. Dilip Buildcon is a small cap bank construction sector company. It has a market capitalization of Rs 3,574.96 crore.

Dilip Buildcon Stock Outlook

The current market price (CMP) of Dilip Buildcon is Rs 244 apiece, it was opened at Rs 243.85 apiece. The Current Market Price of the stock is Rs 56.55 above the 52-week low of 187.45 level, recorded on July 01, 2022. The 52-week high of the stock recorded on October 13, 2021, is Rs 749.80 apiece.

Dilip Buildcon Returns on Investment

The stocks performed well in short term, however, on long-term investment, the stocks didn't perform well. Over the past 1 week the stocks declined 1.17%, whereas, in the past 1 month, the stocks surged 19.5%. In the past 3 months, the stocks surged 5.26%. The stocks have declined 53.22% over a year. Over the past 3 and 5 years, the shares gave negative returns of 38.2% and 57.24%, respectively.

Financial highlights

Revenue: Rs 26.2bn (+22.1%/+4.6% YoY/QoQ, an 8.1% beat); EBITDA: Rs 2.1bn (-27.4%/-13.3%, YoY/QoQ, a 9.9% miss); EBITDA margin: 7.8% (-534/-162bps YoY/QoQ, vs. our estimate of 9.4%), was a tad below due to elevated raw material prices and lower margin from legacy projects. RPAT: Rs 198mn (-26.7%/+6.6x YoY/QoQ). Exceptional item: Rs 169.7mn profit from transfer of balance 51% stake in its subsidiary company. Consequently, APAT: Rs 71mn (-73.8%/+2.4x YoY/QoQ, a beat of 5.9x). DBL has reiterated its FY23 revenue guidance at Rs 100bn, with EBITDA margin expected between 12-13%.

Robust OB

The OB, as of Jun'22, stood at Rs 251.6bn (~2.8x FY22 revenue), with Rs 61bn worth order inflow (OI) in Q1FY23 (vs. FY23 OI guidance of Rs 80-100bn). Segment-wise, 47/22.4/16.6/9% of the OB comprises road & highways/mining/irrigation/tunnel projects. Client-wise, the central/state government orders account for 78/22% the OB. DBL has revised FY23 OI guidance at Rs 100-120bn.

Balance sheet deleveraging augurs well

The standalone net debt as of Jun'22 came in at Rs 28.9bn vs. Rs 27.4bn as of Mar'22, with net D/E at 0.66x vs. 063x as of Mar'22. The NWC days as of Jun'22 stood at 82 vs. 89 as of Mar'22. The total equity requirement in all 25 HAMs is Rs 34.1bn, of which 18.8bn has been invested until Jun'22. The balance equity infusion guidance stands at INR 8.6/3.1/3/0.5bn for 9MFY23/FY24/35/26, which shall be funded mainly via proceeds from internal accruals and Shrem deal residual inflows. DBL has realised Rs 4.2bn (Rs 2.9/1.2bn in Q4FY22/Q1FY23 with balance Rs 0.2bn to be received on occurrence of certain tax related events) from 100% divestment of its stake in three HAM projects to Cube Highways. It has guided for FY23 Capex at Rs 250-300mn, with Rs 100mn incurred in Q1FY23.

Weak margin impacts recovery,

DBL reported revenue/EBITDA/PAT of Rs 26.2/2.1/0.07bn- EBITDA a miss, while revenue/APAT beat our estimates. EBITDA margin-a tad low at 7.8%-continues to remain under pressure on account of higher raw material prices/time and cost overruns on legacy projects (impacted by COVID19 delays). The order book (OB), as of Jun'22, stood at Rs 251.6bn (~2.8x FY22 revenue). The standalone net debt stood at Rs 28.9bn, with net D/E at 0.66x, as of Jun'22. DBL received Rs 1.2bn on transfer of balance 51% stake in three HAM projects to Cube Highways.

Buy for a target price of Rs 369

Commenting on the stocks, HDFC Securities said, "We have recalibrated our EPS estimates lower to factor in weak margins in legacy OB and higher impact of commodity inflation in non-NHAI order backlog, where inflation pass-through is not commensurate with the actual inflation. We maintain BUY with reduced SOTP-based Target Price of Rs 369/sh (12x Mar-24E EPS, 0.8x P/BV HAM equity investment).

About – Dilip Buildcon Limited

The Company was incorporated as Dilip Buildcon Private Limited on June 12, 2006, as a private limited company under the Companies Act, 1956 with the RoC. Subsequently, the business of M/s Dilip Builders, a sole proprietorship concern along with all its assets and liabilities was transferred to Dilip Buildcon Private Limited with effect from April 1, 2007, on a going concern basis pursuant to an agreement dated May 19, 2007. The Company was converted into a public limited company pursuant to a special resolution of the Shareholders dated July 12, 2010, and consequently, the name of the Company was changed to Dilip Buildcon Limited. A fresh certificate of incorporation pursuant to the change of name was issued by the RoC on August 26, 2010.