Date:
October 01, 2008
Ref. No. MPML/BB/154/041/2008
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Sensex
is trading down 250 points due to bad global cues. In this falling
market one good stock has been overlooked ie. HDIL Ltd. the company
is the second largest company in construction sector. It operates
in Niche area of Slum rehabilitation. As per current valuation
the company has a lowest P/E ratio of 5.03% in construction sector.
We are positive about this company's performance in the future and
Hence, we suggest you to buy HDIL at current level.
THE DOMESTIC real estate sector is at an inflexion point with expectation of consolidation. Housing Development & Infrastructure (HDIL), which operates in a niche area of slum rehabilitation, seems better poised to withstand the current slump, compared to other realty players. HDIL, the erstwhile Dheeraj Group, was incorporated in 1996. Its expertise lies in developing slum rehabilitation projects and ensuring their timely delivery. Since then, it has developed 29 projects covering approximately 28.8 million sq ft of saleable area, including 14.4 million sq ft sold to other builders, primarily in the Mumbai Metropolitan Region (MMR). An additional 3.3 million sq ft of rehabilitation housing area under the Slum Rehabilitation Scheme (SRS) has also been developed. HDIL follows a build and sell model for all properties in residential, commercial and retail segments. The company has also forayed into high-growth businesses like SEZs, hospitality, oil & gas, entertainment and media. Its total land reserves comprise of 196 million sq ft of saleable area. This will be developed through 20 ongoing projects covering 88 million sq ft and 14 more projects to be launched in future. The company is also developing 2,300 acres under SEZs. Approximately 87% of HDIL's land reserves are in MMR, which gives it a competitive advantage, since this is the prime real estate market. CURRENT PROJECTS: The company is focusing on timely execution of ongoing projects in Mumbai. The biggest among these is the Mumbai airport slum rehabilitation project. This project will generate about 10 million sq ft of land TDR and around 45 million sq ft construction TDR for HDIL over a span of five years. After the completion of this project, it will also be awarded certain commercial land in the airport by GVK. Another major project for HDIL is land development for the Andheri-Versova-Ghatkopar link. The company plans to set up commercial and retail establishments at metro stations. Though it's too early to talk about this project, the project pipeline looks promising for HDIL. The company, along with Lehman, has also bid for the redevelopment of Asia's biggest slum, Dharavi. HDIL recently completed and sold its Dreams mall in Mumbai's central suburbs. Sale of plotted land continues to contribute to its topline. FINANCIALS: The company has shown phenomenal growth in sales, as well as profit. Its sales have witnessed a CAGR of around 144% over the past four years, while net profit has grown more than threefold during the same period. Though its interest cost increased multi-fold on account of high interest outgo, the company was able to maintain its net profit margin at 58%, higher than the industry average of 45%. "We expect the revenue and net profit to grow at 30% on a y-o-y basis". The multi-product SEZ at Virar and SRS will get tax benefits and reduce the company's overall tax liability. Given its proven ability to complete SRS projects, HDIL's financial viability seems positive. Given its proven ability to complete slum rehabilitation projects, HDIL's financial viability seems positive.The company is also set to withstand the slump in realty sector. Awaiting for you Quick Response. Thanks and Regards, PMS Dept.
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