IVRCL Infrastructures - Good stock to buy with strong order book

In the infrastructure and construction space, IVRCL Infrastructures & Projects is better placed given its low leverage. It is one of the best stocks to buy looking at it's strong order book.

According to analysts, the company will require a minimal Rs 270 crore as funding gap for its pending projects. The company’s debt-equity position is also comfortable, allowing it space to raise funds and continue with its growth plans. IVRCL recently raised Rs 200 crore by issuing debentures (interest rate of 12.5 per cent) to Life Insurance Corp of India.

IVRCL’s order book of Rs 15,000 crore is four times its FY08 revenue, and provides strong earnings visibility. Estimates suggest that its revenue should grow at 33-35 per cent and earnings by 25-27 per cent over the next three years. Besides, the company will benefit from the government's emphasis on infrastructure, related to irrigation and water management. IVRCL is a leading player in water and irrigation (about 69 per cent) segments and importantly, most of its projects come from the government sector.

Going forward, lower commodity prices and interest rates along with improving liquidity suggest that the business environment should improve for the sector. At Rs 143, the stock is reasonably priced on a PE basis. Even on a sum-of-parts basis (assigning different values to its core business, real estate subsidiaries, BOT projects and stake in Hindustan Dorr Oliver), IVRCL’s per share value, as estimated by analysts, works out to Rs 200-250.

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