Buy Arss Infrastructure Projects Ltd.

Snapshot:

SECTOR: Construction & Contracting – Civil
NSE CODE: ARSSINFRA
BSE CODE: 533163

MCAP: 557.66 Crore
CMP: 372.85
52 Week High/Low: 1418 / 366.50

About Company: ARSS Infrastructure is one of the fastest growing construction and contracting company of India. ARSS Infrastructure is engaged in infrastructure construction segment including road, railway, highways and irrigation projects. Company was incorporated in 2000. Till date, it has completed 80 various projects across India with value of over Rs. 700 crores.

Investment thesis:

Order, Growth, Expansion: Company is expanding the scope of its operations. It’s primarily knows as Orissa based company. But recently, company entered new regions through new contracts. Company received an order of 1 Billion Rs. by Government of Assam in last quarter. Company also planning to enter new North-East region as margins are high due to low competition. Today, Company has presence in 14 states. Company has received many new orders in Orissa, M.P. In last few months. company increased its order book by 20%. Current Order book stands at about 5,500 crore which is 9 time the current mcap. Company has strong client base including Ministry of Railways, Rail Vikas Nigam Ltd., NHAI, Vedanta, Jindal Steel and Power, Nalco, Orissa-PWD, NTPC, SAIL, Indian Oil. Going forward, we expect healthy order flows in next two years especially in North-east region.

Financial: In FY11, ARSS Infrastructure Projects has reported a sales turnover of Rs 389.18 crore and a net profit of Rs 35.28 crore for the quarter ended Mar ’11. For the quarter ended Mar 2010 the sales turnover was Rs 401.29 crore and net profit was Rs 40.11 crore. Current EPS stands @ 75.56. FY12 PE is close to 4. High Interest Rate, Rising metal price, Extended Monsoon and slow execution lead to bad top line growth. By Dec, 2010 Company Debt is less than 550 Crore. Going forward, backed by health order ARSS is expected to deliver sale of more than 1600 crore in FY12 which will translate 30% Jump in PAT. Out of Total order 85% order consists in Railway and Road which has high margin compare with other segments. On Conservative basis, Company is expected to Post EPS of 100 and 128 in FY12 and FY13.

Valuation : ARSS Infra is backed by healthy order book with next 24 months revenue visibility. Its highly likely that company will grow its earnings by 35% CAGR for next 2 years. After sharp correction of 75% from Aug High valuation seems attractive for those who looking for fresh entries. At Current market price of 372, Stock is trading at PE of 4 for FY12 as per current year earnings. Investors with 2 year view can BUY this stock systematically. Buy @ CMP 372-350 for Target 700+ in 24-30 months with capital appreciations of 100%.

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