Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

The Pitch Report - Initiating Coverage: NESCO Ltd - BUY - TP Rs.611

Posted On: 2017-11-26 03:45:40

Established in 1939 as the New Standard Engineering Company Ltd (NSE), the company changed the name from New Standard Engineering Company to NESC0 Limited. This reflected in the company's transformation from a pure play engineering company to that of a diversified one:

- Today NESCO, formerly an engineering company, has emerged as predominantly a service company. At present, about 78% of its total revenues and almost all of profits come from two service business units viz., IT Park and Exhibition Centre. The company is also debt free and cash rich with net cash of ~Rs.5,000 million, which is 14%of its current market cap;

- The Exhibition segment holds the distinction of being the largest exhibition center promoted by the private sector in India. It is located in the heart of Mumbai, just adjacent to the Western Express Highway, which serves as an important arterial road transporting goods to and from the City;

- Currently NESCO has three IT Parks at Goregaon complex with total leasable area of 0.93 msf. NESCO's IT parks are home to marquee clienteles like BlackRock, HSBC, KPMG, MSCI, PWC, TCS, etc. The company is doubling its leasable space by setting up IT park 4 with leasable area of 1.2 msf (developable area: 1.7 msf) at an estimated capex of Rs.6,000 million;

- Both IT Parks and Exhibition Centre are inflation sensitive and hence, these business models assure quite steady growth in the incomes in the long run. NESCO's revenues as well as net profits have roughly doubled in the last 4 years;

- NESCO has diversified into food court business through its wholly-owned subsidiary, Nesco Hospitality Private Ltd. The company has commissioned two food courts and started food services within NESCO Complex with leading international and national food brands;

Major expansion to drive profit growth in future

The management proposed to invest Rs.15 billion for the expansion of IT Parks, Bombay Exhibition Centre and Nesco Hospitality. It has expressed its commitment to finance these expansions from own resources, without any borrowings, and to remain debt free.

In our vision, its land bank holds substantial intrinsic value

NESCO's enterprise value (EV) stands at Rs.31 billion (Market cap of Rs.36 billion minus cash of Rs.5 billion). Its industrial and service units are located on a land bank of around 70 acres on western highway in Mumbai. Going by the trend, we estimate the value of land in this area to be around Rs.1,000 million per acre which gives an intrinsic value of around Rs.70 billion. However, we are sticking to PE method as it is not likely to unlock value from the land bank as it is opting to expand both IT Parks and Exhibition centre in this complex.

Outlook and Valuation

The stock has got corrected by around 14% from its 52W High and is trading at 19x its FY2018E EPS of Rs.26.69 and at 16.8x its FY2019E EPS of Rs.30.16. Despite such cash and land bank, NESCO trades at 19x its FY2018 expected EPS. We expect its revenue and profits to keep growing consistently in future due to the nature of its business models. Hence, we initiate a BUY on the stock with a conservative target price of Rs.611/- which is 20x its FY2019E EPS.

Risk to View

Any possible severe deflationary trend in the Indian industrial economy could impact adversely its exhibition business.

Shares of NESCO LTD. was last trading in BSE at Rs.537.15 as compared to the previous close of Rs. 541.5. The total number of shares traded during the day was 20331 in over 667 trades.

The stock hit an intraday high of Rs. 556 and intraday low of 535. The net turnover during the day was Rs. 11111873.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Yes Bank trading 52 week low today, support is there at lower levels of 125 - 126 : Epic Research

Bharat Financial Inclusion Limited completes first Direct Assignment transaction of Rs. 1,107.41 crore in FY20

Strong operating performance and Name improves: Angel Broking

Polycab India surges higher: Angel Broking

TCS likely to outperform Infy in short-term: Angel Broking

Railway Vikas Nigam IPO Listing - Mr. Abhijeet Bajpai, Co-Founder, Avighna Trades

Polycab India Ltd: Angel Broking

Maruti to cut production to balance with demand: Angel Broking

BATA India Q3: Angel Broking

Result Update: Essel Propack Ltd - BUY - TP Rs.130 - Kotak

Result Update: Radico Khaitan Ltd - ACCUMULATE - TP Rs.460 - Kotak

Result Update: GHCL - ACCUMULATE - TP Rs.270 - Kotak

Initiating Coverage : JK Paper Limited - Buy - TP Rs.200 - Kotak

Result Update: Mirza International Ltd - BUY - TP Rs.104 - Kotak

Result Update: Asian Granito India Ltd - REDUCE - TP Rs.185 - Kotak

Result Update: Va Tech Wabag Ltd - BUY - TP Rs.378 - Kotak

Result Update: PNC Infratech Ltd - BUY - TP Rs.197 - Kotak

Result Update: KNR Constructions Ltd - BUY - TP Rs.235 - Kotak

Result Update: Talbros Automotive Ltd - BUY - TP Rs.400 - Kotak

Result Update: Sterling Tools Ltd - ACCUMULATE - TP Rs.361 - Kotak

Result Update: Engineers India Ltd - BUY - TP Rs.155 - Kotak

Result Update: Century Plyboards Ltd - BUY - TP Rs.232 - Kotak

Result Update: Eveready Industries India Ltd - BUY - TP Rs.310 - Kotak

Result Update: The Phoenix Mills Ltd - BUY - TP Rs.707 - Kotak

Result Update - Voltamp Ltd - BUY - TP Rs.1320 - Kotak

Result Update: Berger Paints Ltd - SELL - TP Rs.280 - Kotak

Company Visit Note: Ratnamani Metals & Tubes Ltd - NOT RATED - Kotak

Result Update: Insecticides India Ltd - BUY - TP Rs.643 - Kotak

Result Update: Nagarjuna Construction Company Ltd - BUY - TP Rs.135 - Kotak

Result Update: Shankara Building Products Ltd - BUY - TP Rs.1537 - Kotak

Result Update: Dollar Industries Ltd (DIL) - BUY - TP Rs.390 - Kotak

Result Update: Greenply Industries Ltd - ACCUMULATE - TP Rs.161 - Kotak

Result Update: Central Depository Services (India) Ltd - BUY - TP Rs.290 - Kotak

Result Update: Blue Star Ltd - BUY - TP Rs.655 - Kotak

Result Update: Bluedart Express Ltd - ACCUMULATE - TP Rs.2875 - Kotak

Result Update: Mahindra Holidays & Resorts Ltd - BUY - TP Rs.315 - Kotak

Result Update: GHCL - BUY - TP Rs.270 - Kotak

Result Update: NIIT Ltd - BUY - TP Rs.110 - Kotak

Result Update: Quess Corp Ltd - BUY - TP Rs.1072 - Kotak

Result Update: Praj Industries Ltd - REDUCE - TP Rs.108 - Kotak

Result Update: Supreme Industries Ltd - BUY - TP Rs.1205 - Kotak

Granules India Ltd Q2 consolidated PAT climbs to Rs. 60.26 crores

Result Update: Kansai Nerolac Paints Ltd - BUY - TP Rs.485 - Kotak

Result Update: Zensar Technologies Ltd - ACCUMULATE - TP Rs.257 - Kotak

Bajaj Auto Ltd - OPM below estimate; Retain Accumulate - Emkay

Result Update: Bodal Chemicals Ltd - ACCUMULATE - TP Rs.130 - Kotak

Result Update: Kajaria Ceramics Ltd - BUY - TP Rs.500 - Kotak

Result Update: Persistent Systems Ltd - BUY - TP Rs.870 - Kotak

Auto Industry Volume Update: September 2018 - Kotak

Sector Update - Natural Gas - Kotak

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019