Mid-cap mantra: Execution skills, right decisions give Pratibha Industries the edge
At a time when construction cos are finding it tough to secure new projects, Pratibha Industries is one of the few that has managed to do that consistently.
At a time when construction companies are finding it tough to secure new projects, Pratibha Industries is one of the few that has managed to do that consistently. Thanks to its strong execution capabilities and healthy order, the company’s stock has fallen less than its peers such as HCC, Unity Infraprojects and Simplex Projects.
In the past one year, the stock has fallen 42%, while its peers such as HCC and Unity Infraprojects have fallen by 61.2% and 61.6%, respectively.
Recently, the Mumbai-based company bagged orders worth Rs 772 crore in the building and water management segments. This will take the company’s present order book to Rs 6,568 crore.
Considering an operating profit margin of 10-12% and a 4-5% net profit margin on these projects, it is likely to add close to Rs 35 crore to net profit over a period of next two years. The order book involves projects of wellestablished companies such as Tata Housing and Rustomjee, ensuring timely payment for the company.
Besides strong execution skills, the company’s prudent decisions in terms of focusing on pure construction projects and refraining from venturing into any Build Operate Transfer (BOT) projects has also paid off over the years.
Most construction companies, which ventured into BOT projects, had been bearing the brunt of high interest expenses, unlike their pure construction counterparts. The company’s interest expense as a percentage of operating profit in the half-year ended September 2011 was 42%.
In comparison, firms such as HCC and NCC, which ventured into BOT projects, have an interest expense as a percentage of operating profit of 87% and 59%, respectively. In case of Pratibha Industries, its growing order book justifies the interest expense of 42% as a percentage of its operating profit.
At the end of FY11, on a consolidated basis, the company had a debt-toequity ratio of 1.1, which is better than its peers such as Unity Infraprojects and Supreme Infrastructure, which have a debt-to-equity ratio of 1.2 and 2.3, respectively.
In the past one year, the stock has fallen 42%, while its peers such as HCC and Unity Infraprojects have fallen by 61.2% and 61.6%, respectively.
Recently, the Mumbai-based company bagged orders worth Rs 772 crore in the building and water management segments. This will take the company’s present order book to Rs 6,568 crore.
Considering an operating profit margin of 10-12% and a 4-5% net profit margin on these projects, it is likely to add close to Rs 35 crore to net profit over a period of next two years. The order book involves projects of wellestablished companies such as Tata Housing and Rustomjee, ensuring timely payment for the company.
Besides strong execution skills, the company’s prudent decisions in terms of focusing on pure construction projects and refraining from venturing into any Build Operate Transfer (BOT) projects has also paid off over the years.
Most construction companies, which ventured into BOT projects, had been bearing the brunt of high interest expenses, unlike their pure construction counterparts. The company’s interest expense as a percentage of operating profit in the half-year ended September 2011 was 42%.
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In comparison, firms such as HCC and NCC, which ventured into BOT projects, have an interest expense as a percentage of operating profit of 87% and 59%, respectively. In case of Pratibha Industries, its growing order book justifies the interest expense of 42% as a percentage of its operating profit.
At the end of FY11, on a consolidated basis, the company had a debt-toequity ratio of 1.1, which is better than its peers such as Unity Infraprojects and Supreme Infrastructure, which have a debt-to-equity ratio of 1.2 and 2.3, respectively.
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