Buy Consolidated Construction Company - PINC Initiating Coverage

We initiate coverage on Consolidated Construction Company (CCCL) with a 'BUY' rating and TP of Rs107. The company operates in business comprising civil construction activity. They generate excellent return ratios and are capturing sizeable orders in infrastructure.

- After establishing its brand in civil construction, CCCL is on the path to emerge as an integrated infrastructure player.
- Key emphasis is on infrastructure orders with segments such as Power and Airport playing a crucial role (2.3x Sales/OB FY10).
- Increased traction is seen from Power project orders & indigenously bidding for BoP projects.
- CCCL aspires to become a developer with SEZ and BOT projects (multi-level car parking) on the anvil.

VALUATIONS & RECOMMENDATION

We initiate coverage on CCCL with a 'BUY' rating and value the company based on PE methodology, given its superior return ratios, strong order book position and earning growth expectation of 15.5% and 33.4% in FY11 and FY12. We assign a PE of 14x (average last one year) to FY12E earnings of Rs7.6, which yields a target price of Rs107; an upside of ~33% from the current level. We do factor in the SEZ project (at a nascent stage of development) or real estate projects, which would provide further upside to the stock.

Source : Equity Bulls

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