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Karda Constructions (Buy)
CMP: ₹175.35
Target: ₹278
Karda Constructions (Karda) reported its first full year results post IPO in March2018. Karda result was above estimate with top-line growth of 20 per cent y-o-y and bottomline growth of 64 per cent y-o-y. Karda reported PAT of ₹13.05 crore (estimated ₹12 crore) with much leaner balance sheet owning to i) issue proceeds leading to high cash on balance sheet and improved leverage (D/E); ii) lower long-term borrowings with income generated from operations used to repay debt; and iii) reduced inventory on balance sheet w/o increase in trade receivables.
Karda’s revenue and gross margin were up 20 per cent y-o-y at ₹126.8 crore and ₹41.22 crore in line with estimates. Karda’s gross margins of 32 per cent remain stable over FY18 — even as company forayed into contract constructions and affordable housing.
Ability to maintain similar margin in theoretically low margin business speaks volume about Karda’s execution and marketing capabilities.
We expect FY19/FY20 fully diluted EPS of ₹14.6/17.9 respectively. Karda reported ROAE of 23 per cent much higher than other real estate players.
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