The company’s growth strategy is based on collaboration models like Joint Development (JD), Joint Venture (JV), and Development Management (DM).
Understanding the Business
Man Infraconstruction Limited is an India-based integrated engineering, procurement and construction (EPC) company. The Company is engaged in the business of civil construction, project activities and real estate development, including construction of roads on a design-build-finance-operate-transfer (DBFOT) basis. Its segments include EPC and Real Estate. Its port infrastructure services, residential construction services, commercial and institutional construction services.
Latest business update - Q1FY24 Performance
- Revenue from operations increased by 45% compared to the previous year, reaching Rs. 510 crore.
- Total income also experienced a 45% growth, reaching Rs. 524 crore.
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increased by 63% YoY to Rs. 109 crore.
- Net profit jumped significantly by 112% YoY, reaching Rs. 82 crore.
- Company’s debt as of June 2023 stands at Rs. 136 crore.
- Company successfully maintained a net cash positive position at the consolidated level.
- Company has a strong liquidity position, with over Rs. 530 crore available as of June 2023.
Latest Business Developments - Highlights
Business Development
Company has acquired development rights for one of the largest cluster redevelopments in Ghatkopar having a saleable carpet area of approx. 4 lakh sq. ft. With a revenue potential of Rs. 1,200 Cr over the next 4 years.
- Bagged another significant size EPC order worth Rs. 680 Cr (inclusive of GST) from BMCT (PSA Group) for pavement work on the reclaimed earth for execution of Phase II Infrastructure Works at the Fourth Container Terminal of JNPT.
Sales Performance
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Company’s cumulative sales of 2.83 million sq. ft. of carpet area with a corresponding sales value of Rs. 6,150+ crores as of June 2023.
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Company achieved sales of 0.6 lakh sq. ft. of carpet area in Q1FY24 with a sales value of Rs. 143 crores mainly driven by ‘Aaradhya Parkwood’ and Mulund Project.
Also, have a healthy collection of Rs 276 crore during the last quarter.
EPC / PMC
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Construction of ‘Aaradhya Avaan’ site at Tardeo, Mumbai has begun
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Execution as per schedule of BMCT phase 2 project at JNPT, Navi Mumbai
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MICL to build India’s iconic residential tower in Mumbai
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Building Ultra-Luxury project with saleable carpet area of 6.5 lakh sq. ft.
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Revenue potential of around Rs. 3,000 crores
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MICL to build 10,000+ sq. mtr. gated community in Ghatkopar East
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Building Ultra-Luxury project with saleable carpet area of ~4.0 lakh sq. ft.
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Acquired development rights from 10 societies in Ghatkopar east
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Revenue potential of Rs. 1,200 Cr over the next 4 years
Business Efficiency of Man Infra-construction
This company has consistently focused on maintaining a strong financial position, as shown by having more cash than debt as of June 2023. They prefer to keep their debt low and prioritize cash flow, which means they are careful with their finances and aim for a healthy profit.
In addition to being financially responsible, the company sets itself apart by comparing its performance with international companies and embracing a modern luxury lifestyle philosophy. They work with well-known architects and consultants to create top-quality products that make customers very happy.
The company also has a skilled in-house team that can efficiently handle real estate projects. This team includes engineers, architects, and experts who are good at working with government agencies. The senior management is closely involved at every step, and this commitment has resulted in the company winning 14 prestigious awards. Their return on equity and return on capital consistently exceeds 25%, which is quite impressive.
Competitive Advantages of Man Infra
The company has a strong track record of successfully completing 13 projects, including residential and commercial developments. They consistently finish their projects ahead of schedule, highlighting their commitment to quality and execution. As of June 30, 2023, they’ve invested about Rs. 700 crores in their own real estate projects, showing their dedication to the real estate sector. Their real estate portfolio covers an impressive 4.6 million square feet of space, including ongoing projects, future developments, and potential for more growth. This extensive portfolio reflects their expertise and commitment to the real estate industry.
The company’s growth strategy is based on collaboration models like Joint Development (JD), Joint Venture (JV), and Development Management (DM). These approaches help them grow while also sharing risks and leveraging the skills of strategic partners. This allows them to benefit from Man Infra’s strong execution abilities, leading to better control and higher profits. They maintain tight control over project costs and employ careful monitoring practices to avoid overspending, further improving their profits. Additionally, the company focuses on managing their cash flow wisely to handle project risks effectively and secure high returns on investment. This comprehensive approach to project development and management highlights their dedication to sustainable growth and profitability.
Con-Call Insights
Capex: The company secured a significant port order worth Rs. 680 crores for infrastructure work at the 4th container terminal of JNPT, and they have a secured pipeline of about Rs. 1,000 crores in the EPC sector.
New Products/Projects: Company announced a luxurious residential project in Ghatkopar East and a Tardeo project, both with substantial development plans in progress. They’re also investing in a project in Florida, which is expected to be completed by 2026-27.
Financials: The company declared a second interim dividend for the current financial year and reported a healthy collection of Rs. 276 crores in the recent quarter. Their financial track record demonstrates consistent revenue growth, and they experienced strong growth in revenue from operations, EBITDA, and net profit in Q1 FY24. They have reduced debt and improved liquidity, maintaining a net cash positive position with over Rs. 530 crores in liquidity.
Real Estate: The company has a substantial real estate portfolio of approximately 4.6 million square feet, including ongoing and upcoming projects. They are open to both joint development agreements and development & marketing models in their real estate projects. Their risk is mitigated in the development management model, as they don’t invest in land, limiting their risk to construction and approvals. They have their own sales team to manage marketing and sales for their projects.
Guidance: The company anticipates strong revenue growth in the coming financial year.
Credit Analysis for Equity Investing in Man Infra
Equity investors should take note of Man Infra-construction Limited’s recent ‘CARE A1’ rating upgrade for its short-term bank facilities, which reflects their strong liquidity position and stable long-term rating. The company has demonstrated healthy operational performance, marked by a substantial increase in revenue and a robust order book. While they’ve improved their capital structure and reduced leverage, their overseas subsidiary venture in the USA presents a potential rating sensitivity. Additionally, upcoming projects pose risks, and their high concentration in the EPC segment warrants attention. Despite these considerations, Man Infra-construction maintains solid liquidity, mitigating some of these concerns. Overall, with a positive outlook and expectations of robust revenue growth, the company offers potential opportunities for equity investors, though they should closely monitor project execution, client concentration, and the performance of their overseas subsidiary.
Source: CRISIL Filings
Company Management expects 25% average profit margins in the coming results
According to Manan P Shah, the Managing Director of Man Infra Construction, they are currently involved in one of the most extensive redevelopment projects in Goregaon and Malad. This redevelopment spans a land area of approximately 40,000 square meters or nearly 10 acres, and it holds the potential for roughly 17 lakh square feet of carpet area. Their plan is to execute this project over the next five years. The company anticipates favourable profit margins from the interest income generated by the funds invested in this project, as well as from the equity gains originating directly from the project itself.
Conclusion
Man Infraconstruction Limited (MICL) has positioned itself for strong growth and performance in the coming years. They have successfully undertaken significant redevelopment projects and have secured substantial EPC orders, indicating a healthy project pipeline.
With a focus on financial discipline and maintaining a net cash-positive position, the company appears well-prepared to navigate potential challenges. Moreover, their substantial real estate portfolio and commitment to various development models reflect their expertise in the industry. While there are some potential risks to be mindful of, such as their overseas subsidiary venture and upcoming project execution, the overall outlook is positive.
For prospective investors, MICL’s strong performance, financial discipline, and promising portfolio make it an attractive investment opportunity. Their commitment to growth, both in the domestic and international markets, coupled with their efficient project execution, presents a potential for solid returns.
However, investors should stay vigilant regarding project progress and any developments related to the overseas venture. Overall, MICL’s well-rounded approach and positive growth outlook position them as a compelling option for equity investors looking for opportunities in the construction and real estate sectors.
Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.