Unity Infraprojects: A Promising Investment Opportunity
Mumbai-based Unity Infraprojects, a small-sized construction firm specializing in buildings, water, and roads, presents a compelling investment opportunity in the medium term. This potential is driven by a robust order book, a strong balance sheet, and the prospective value to be unlocked from its diverse real estate projects. Beyond its construction activities, the company is developing real estate on its land parcels in several key cities: Nagpur, Bangalore, Pune, Kolkata, and Goa. These projects encompass a substantial total saleable area of nearly nine million square feet.
Unlocking Real Estate Value
One of the key drivers of Unity Infraprojects' potential lies in its capacity to capitalize on its real estate holdings. While previous monetization efforts faced delays exceeding a year, the company is now nearing final approvals for the launch of its Bangalore residential project. This project boasts a substantial saleable area of nearly three million square feet, with a launch anticipated within the next three months. Following this launch, Unity Infraprojects plans to concentrate on monetizing its real estate in other cities, further bolstering its financial position.
Strong Order Book and Roads Segment Focus
The company's construction business also exhibits substantial strength, with a current order book totaling Rs 4,700 crore. This figure represents 2.75 times the company's FY11 revenues, providing significant visibility for the next three years. Unity Infraprojects has strategically increased its presence in the roads segment, leveraging its backward integration through ownership of machinery. This strategic move has allowed the company to achieve superior operating margins compared to competitors, even within the intensely competitive roads segment.
Healthy Financials and Attractive Valuation
The company’s financial health is further underscored by a strong balance sheet, with a debt-equity ratio of 1.1 as of September 2011. This ratio stands out among its peers, reinforcing its financial stability. In the nine months leading up to December 2011, Unity Infraprojects maintained a commendable operating margin of 15.5%. Currently, Unity Infraprojects’ stock trades at a P/E of 3.9. This is notably lower than similar-sized competitors such as Pratibha Industries and Supreme Infrastructure India, trading at P/E ratios of 5.9 and 5.2, respectively. Considering its growth trajectory and the discount relative to peers, the stock appears attractively priced at the current level.
"Unity Infraprojects stands to gain..."