Ircon International Ltd stock fundamental analysis

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• Market Cap:  4,376 Cr.
• Current Price:  93.05
• 52 weeks High / Low  119.80 / 58.00
• Book Value:  88.70
• Stock P/E: 9.02
• Dividend Yield: 2.89 %
• ROCE: 8.92 %
• ROE: 11.41 %
• Sales Growth (3Yrs): 24.40 %
• Listed on BSE and NSE
• Company Website
• Face Value:  2.00

• PEG Ratio: -0.90
• Promoter holding: 89.18 %
• Pledged percentage: 0.00 %
• Debt:  1,846 Cr.
• Price to Earning: 9.02
• EPS:  10.32
• Net profit:  485.31 Cr.
• Profit growth: 7.83 %
• Profit growth 7Years: -0.81 %
• Net profit preceding 12months: 469.62 Cr.
• Profit growth 3Years: 3.94 %
• Dividend yield: 2.89 %
• Debt to equity: 0.44
• Sales last year:  4,798 Cr.
• Sales growth: 12.36 %
• Unpledged promoter holding: 89.18 %
• Investments:  803.51 Cr.
• Intrinsic Value:  -148.79

 

Ircon International Ltd., a government company under Ministry of Railways, is the leading turnkey construction company in public sector well known for covering entire spectrum of construction activities and services in infrastructure sector. It provides EPC services on a fixed-sum turnkey basis as well as on an item-rate basis for various infrastructure projects and also execute on build, operate and transfer mode in various projects in order to meet the requirements of its bids. Alternate investment funds have largest shareholding at 2.52%. The company has a marketcap of Rs4,300crore.
 

Investment rationale

 

Robust order book: The Company has a strong aggregate order book of Rs ~30,700 cr as on 31st March 2020 out of which Rs. 26,000 crores comes from rail related projects. The current order book is ~5.7x of its FY20 revenues signaling enough revenue visibility over the long term. Diversification across the infrastructure sector and broad geographical coverage are the prime reasons for large order book.

 

Strong track record of project completion: Till date, IRCON has completed around 3025 projects in India whereas around 110 projects on global platform across 24 different countries. IRCON operates not only in highly inaccessible areas like Jammu & Kashmir, Sikkim, Nathu La Pass etc., but also participates in competitive intensive environment and bid along with other infrastructure companies to get works and execute them on a strictly professional basis. Till date, company has executed many important projects of national importance.

 

Covid-19 impact: Company management believes that impact of lockdown is likely to result in reduction in Revenue and Profitability in the FY 2020-21. Management is confident that business is likely to reach to normalcy in later half of the year. Liquidity is not an issue for the company in such desperate time. Company has sufficient financial instruments which can be encashed easily. Furthermore, company has long term loan from IRFC which has back to back arrangement with Ministry of Railways.

 

Outlook & valuation: Over the last 3 years, Ircon’s topline & bottom-line has shown a CAGR growth of 21.7% & 9.5% respectively. Despite challenging business scenarios of lockdown in Q4FY20 Ircon posted a revenue & net profit growth of 4.2% and 15.7% respectively YoY. Company’s strong order book & confident management commentary provides visibility despite weak business sentiments in near term. At current market price the stock is trading at 9x of its TTM earnings.
 

Sep 2018	Dec 2018	Mar 2019	Jun 2019	Sep 2019	Dec 2019	Mar 2020	Jun 2020
	89.18	89.18	89.18	89.18	89.18	89.18	89.18	89.18
	1.28	0.32	0.28	0.26	0.15	0.14	0.20	0.18
	3.87	5.14	4.95	4.92	4.31	3.35	2.88	2.90
	5.66	5.36	5.58	5.63	6.35	7.33	7.73	7.74