Man Infra share price jumps over 180% in 1 year; Axis Securities says buy it
Axis Securities has initiated coverage on Man Infraconstruction with a buy call, fixing a target price of ₹270, implying a 28 per cent upside potential in the stock price.
“We initiate coverage on Man Infraconstruction with a buy recommendation. Our recommendation is supported by (a) a healthy project pipeline, (b) an asset–light business model, and (c) strong execution capabilities. Based on our DCF valuation method, we arrive at a target price of ₹270, implying an upside of 28 per cent from the current levels,” said Axis Securities.
Man Infra share price gained nearly 4 per cent to rise to the level of ₹218.40 in morning trade on Friday, April 12, on NSE. At the current market price, Man Infra share price has jumped 181 per cent over the last year against a 28 per cent gain in equity benchmark Nifty 50. On a monthly scale, Man Infraconstruction share price is up nearly 6 per cent in April so far.
Man Infraconstruction share price hit its 52-week high of ₹249.30 on February 5 this year and its 52-week low of ₹75.55 on April 11 last year on the NSE.
Five key reasons behind Axis Sec’s buy call:
1. The company’s asset-light business model
Axis pointed out that the business model of Man Infraconstruction can be divided into two segments – real estate projects and EPC (engineering, procurement and construction) projects. These segments have multiple streams of income, which helps diversify the company’s risk profile.
“For the real estate business, Man Infraconstruction has adopted a joint venture (JV)/development management (DM)/joint development (JD) model, which spreads its leverage with other partners. This model is both value-accretive and scalable, allowing the company to maximize cash flows while maintaining low leverage,” said Axis Securities.
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2. Multiple income streams and innovative business model
Axis Securities highlighted that the income streams for Man Infraconstruction include DM fee (nearly 12-14 per cent), EPC margin on ports (nearly 20 per cent), interest margin (nearly 10-14 per cent), and PMC margin (nearly 10 per cent).
As per the brokerage firm, at present, the ratio of JV/DM projects to owned projects is 1:3, but the company plans to adjust this to 2:3 in the coming years which will ensure efficient use of capital and high scalability.
“Under DM, all costs and revenue are booked in landlord, while in JV all costs and revenue are booked in SPV while Man Infraconstruction receives a share of profit based on its stake in the JV entity. This approach maximises the company’s bottom line without exerting stress on the balance sheet,” Axis Securities said.
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3. Sales performance
As per Axis Securities, as of June 30, 2023, Man Infraconstruction has invested only nearly ₹700 crore in real estate projects, covering a portfolio of 4.6 million square feet. This relatively low investment for a real estate developer makes the company an attractive company in this segment, Axis said.
“Man Infraconstruction has near-zero inventory left in completed projects. The company boasts an impressive sales record at the launch, with over 70 per cent of its ongoing projects already sold, this does not include new launches done in the last six months – Avaan and Aaradhya One Park,” said Axis Securities.
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4. Robust order book
Currently, Man Infraconstruction has nearly 2 million square feet of ongoing projects, including development projects in Dahisar, Ghatkopar, Mulund, Juhu, and Tardeo-Avaan. Its upcoming projects comprise around 3.7 million square feet of real estate projects, Axis pointed out.
Moreover, its EPC business order book stands healthy at ₹1,047 crore which includes ongoing ports and infrastructure projects covering nearly 110 hectares. Man Infraconstruction is also determined to bid for future government and commercial projects, Axis said.
5. Healthy balance sheet
Axis pointed out that the company has maintained a very healthy balance sheet with only ₹205 crore in borrowings, which include short-term borrowings of ₹135 crore (secured debt). It has considerably reduced its debt by around ₹300 crore in FY23, year-to-date.
“The company exhibits a very low debt book for a real estate developer, combined with healthy and consistent cash flow. Despite paying back a majority of debt in FY23-24, it has cash and cash equivalents of nearly ₹545 crore as on Dec-23. Additionally, in Dec-23, the company issued ₹543 crore of preferential shares for future growth expansion,” Axis said.
“A low leverage and high cash flow blend present a very efficient and attractive scenario in the real estate development business. Due to its asset-light business model, it can scale up without significant capital pressure, thereby improving the bottom line in coming years,” said the brokerage firm.
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 12 Apr 2024, 11:13 AM IST
