Analysis of Lanco Infratech Ltd

Introduction

[From Company Website]
Lanco Infratech has subsidiaries and divisions across a synergistic span of verticals. These include Construction, Power, EPC, Infrastructure, Property Development, and Renewables. Lanco Infratech’s projects, operational and underway, are spread across India.

A member of the UN Global Compact, Lanco Infratech is recognized for its Good Corporate Governance and Corporate Social Responsibility initiatives led by the Lanco Foundation.

[Analysed]
Lanco Power
Lanco has 2092 MW of operational Power Plants. A further 7148 MW plants are under construction at various locations, out of which around 650 MW is of renewable energy including Hydro Power and Solar Power. They are also engaged in Power Trading.

The increasing Power requirement of a developing India augurs well for the company.

Infrastructure/Construction Projects

Lanco Hills is one of the largest mixed property development projects in India located at  Manikonda in Hyderabad, India. It is spread over 100 acres and it is a Rs 5500 Crore project. It includes 15 Residential Towers, 11 towers of sez/non sez IT spaces, club house, multiplex, mall, 5 star and business class hotels, serviced apartments and more. The proposed signature tower with 121 floors would be the tallest residential tower in the world.

Under Construction Order Book

• Construction of New Terminal Building at Biju Patnaik Airport, Bhubaneswar.
• 1015 MW Imported Coal –based Power Project of Udipi Power Corporation Ltd at Udupi in Karnataka.
• 2 x 300 MW Coal-based Power Project of LANCO Amarkantak Power Ltd at Pathadi near Korba in Chhattisgarh.
• 2 x 35 MW Hydropower Projects of LANCO Green Power Pvt Ltd in Himachal Pradesh.
• 2 x 5 MW Hydropower Projects of Vamshi Industrial Power Ltd.
• 4 X 125 MW Teesta VI Hydro Electric Project of LANCO Energy Pvt Ltd in Sikkim
• 2 X 600 MW Thermal Power Project of LANCO Anpara Power Ltd in Uttar Pradesh.
• 368 MW Kondapalli Gas Power Project
• 81 km Road connecting Bangalore –Hoskote–Mudbagal in Karnataka for NHAI.
• 82 km Road Connecting Neelamangla-Devihalli in Karnataka for NHAI.
• Construction Order for Lanco Hills.
• Construction of New Terminal Building at Varanasi Airport for Airports Authority of India.
• Construction of Medical College at Srikakulam in Andhra Pradesh.
• Construction of Medical College at Ongole in Andhra Pradesh.
• Construction of Vedic University at Tirupati in Andhra Pradesh.
• Construction of Medical College at Belgaum in Karnataka.
• Lanco is executing the construction of New Terminal for Varanasi Airport for the Airports Authority of India. 

Financial

Sales for Sep '10 stood at Rs 1095 Cr and were higher than preceding quarter's of Rs 1075 Cr (Jun '10) but were considerably lower than that of Sep '09, which stood at Rs 1474.9 Cr.  YoY net Profit decrreased from Rs127.38 Cr to Rs 45.79 Cr, which were lower than June '10 net profit of  Rs 71.32 Cr.

Current annualised EPS stands at Rs 0.98 (Rs 0.49 for the half year ending Sep '10). Thus the current PE multiple stands at around 66 (For the price of Rs 65). The EPS has almost halved from the previous year, thereby doubling the PE multiple.

The Book Value per Share of the company stands at Rs 12.82 for FY10. Thus, the stock currently trades over 5 times the book value. Debt-Equity ratio is good for the company at 0.88.

Thus, although the financials don't look good for the company, following reasons are keeping the price as high as Rs 65:

• An Extremely Strong Order Book
•  A Rs 4100 Cr EPC (Engineering, Procurement and Construction) contract from a Moser Baer Subsidiary
• Host of Power Plant projects.