Ceigall India Limited. (Subscribe)

Highlights

Ceigall India Limited (CIL) incorporated on 2002, is an infrastructure construction company with experience in undertaking specialized structural work such as elevated roads, flyovers, bridges, railway over bridges, tunnels, highways, expressways and runways.

Their principal business operations are broadly divided into EPC projects and hybrid annuity model (HAM) projects, which are spread over ten states in India. They are one of the fastest EPC companies in terms of 3-year sales CAGR as of FY24, among the companies with a turnover of over Rs. 10,000 million in FY24 with over 20 years of experience in the industry.

As of now, the company has completed over 34 projects, including 16 EPC, one HAM, five O&M and 12 Item Rate Projects, in the roads and highways sector. Currently, the company has 18 ongoing projects, including 13 EPC projects and 5 HAM projects which includes elevated corridors, bridges, flyovers, rail over-bridges, tunnels, expressway, runway, metro projects and multi-lane highways.

In addition to undertaking operation and maintenance (O&M) activities in accordance with their contractual obligations under the EPC/HAM concession agreements, they have also undertaken independent O&M projects. Further, they have also undertaken in the past and continue to undertake sub-contracting projects.

Out of the total proceeds of Rs. 12,526 mn, Rs. 997 mn would go towards Purchase of equipment. ~Rs. 4,134 mn would utilize towards repayment/prepayment of all or certain borrowings availed by the company and its subsidiary, Ceigall Infra Projects Private Limited, ~Rs. 1,710 mn would utilize towards general corporate purpose and ~Rs. 5,684 mn would go towards existing selling shareholders of the company.

Key Highlights

• India stands out as the fastest-growing economy among the major economies with real gross domestic product of Rs. 160.06 trillion in FY24 and estimated to emerge as the third-largest economy globally by 2027, infrastructure sector continues to play major role with 3.50 pct of gross domestic product contribution with Rs 52,962 bn investments in Infrastructure industry between FY24 to FY28. In the Union Budget for FY25, the Government of India continued its focus on infrastructure development with budget estimates of capital expenditure towards the infrastructure sector of Rs. 11.11 trillion.
• As of Q1FY25 the company has orderbook of Rs. 92,258 mn which is almost ~3.05 of FY24 sales of Rs. 30,294 which indicates revenue visibility in near term. Out of the total orderbook, ~80 pct is awarded by NHAI and rest ~20 pct is came from contracts with other central, state governmental and local departments.  
• They have been empanelled to participate with the Delhi Metro Rail Corporation Limited in its upcoming tenders involving inter alia construction of railways, mega bridges and tunnels in India and abroad and also with a public sector undertaking for highways, bridges and tunnel construction work in north-eastern states of India.
• They have a consistent track-record of execution of projects either on time or ahead of schedule. They believe that their efficient project execution capabilities have enabled them to execute projects in a timely manner, and in certain cases before the stipulated timelines, while maintaining requisite quality standards.
• Their growth is largely attributable to their efficient business model which involves careful identification of the projects and cost optimisation, which is a result of executing their projects with optimum planning and strategy. The preferred to choose projects which has double digit EBITDA margin.
• CIL key strategies include (i) Diversification by leveraging existing capabilities (ii) Selectively expand their geographical footprint (iii) Continue to explore hybrid annuity-based model to optimize their project portfolio (iv) Continue focusing on enhancing execution efficiency (v) Continue to grow and benefit from the robust future growth of India’s economy and infrastructure.
• Sales of the company has grown by ~63.46 pct CAGR during the period FY22-24 and EBITDA and Profit grew 66.87 pct CAGR and 55.49 pct CAGR over FY22-24. During FY24, company reported sales of Rs. 30,294 mn which grew by 46.48 pct YoY while EBITDA jumped by 75.13 pct YoY to Rs. 5,177 mn as EBITDA margin expanded from 14.29 pct in FY23 to 17.09 pct in FY24. As of FY24 the company reported profit of Rs. 3,043 mn which was grew by ~81.88 pct YoY.

Key Risk

• Delays in the completion of construction of ongoing projects could lead to termination of their contracts or cost overruns or claims for damages.
• Their business is subject to seasonal and other variations and they may not able to accurately forecast their project schedule which could have an adverse effect on their cash flows, business and results of operations.
• CIL has negative cash flows from operating activities in the past which can impact operating activities.

Financial Performance

Peer comparison based on FY24 Financials

Valuation

Ceigal India Limited is an infrastructure construction company with experience in undertaking specialized structural works such as elevated roads, flyovers, bridges, Railway over bridges (ROB), tunnels, highways, expressways and runways. Ceigall have demonstrated track record of completing the Projects ahead of schedule. At the upper end of the price band of Rs. 401 the issue is priced at a PE of ~23x its FY24 earnings. The issue looks fully priced. However, one can subscribed for listing gains.

Also read: Evolving Landscape of Financial Advisory in India

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