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Dilip Buildcon Limited stock

Bhopal-based Dilip Buildcon Limited has been categorised as one of the fastest growing full-service infrastructure company. The company has construction capabilities in roads & bridges, mining, water sanitation, sewage, dams, irrigation, industrial, etc. It has its presence in more than 19 states & 1 union territory. The company is the owner of construction equipments with 10,100 construction equipments. 

The company has just released its results for the quarter ended June 30, 2023 and its revenues came in at INR26,084 million and EBITDA (excluding the other income) of INR3,348 million. PAT of the company was INR834 million in 1Q24 versus INR198 million in 1Q23. The company has won irrigation project of INR6990 million for construction of malhargarh Pressurized Micro Lift on turnkey basis (project For 46,500 Ha. Irrigation), in Madhya Pradesh, District -Mandsaur. 

Net order book of the company as on 30th June 2023 was INR2,40,509 million. Out of this order book, 37.14% is made up by roads and highways projects, special bridge projects made the contribution of 2.43%, mining made up 18.06%, irrigation projects contribute 16.96%, metro projects contributed 5.67%, tunnel projects made up 7.32% and water supply projects accounted for 12.43%. 

Approximately 82.27% of the company’s order book comes from the Central Government and 17.73% of the order book was made up by State Government. 

Dilip Buildcon Limited has just informed that the project “4 laning from km. 42.000 to km. 80.00 of Dodaballapur Bypass to Hoskote section of NH-648 (Old NH-207) on Hybrid Annuity Mode under Bharatmala Pariyojna in Karnataka (Package-II)” has been provisionally completed. The company stated that Provisional Completion Certificate was issued by the authority and they have declared that the project is fit for entry into commercial operation. 

In 1Q24, company saw revenues from the roads, special bridges & tunnels segment fall by 6% on quarter-over-quarter basis to INR18,955 million in comparison to INR20,266 million in the corresponding quarter of the prior year. However, its revenue from metros, urban & water supply segment went up by 18% on quarter-over-quarter basis to INR2,471 million in comparison to INR2,091 million in the corresponding quarter of prior year. 

Key strengths of Dilip Buildcon Limited

The company has been categorised as an established player in Indian road construction sector given its scale of operations and order book size. The company decides to bid for projects post factoring the synergetic benefits which arise from clustering of projects and stretches having comparatively minimal challenges on land acquisition and clearances. As on December 31, 2022, it has the portfolio of 18 under-construction HAM projects. 

Largest shareholder of the company, Mr. Dilip Suryavanshi and family, are in this business of road construction for over 2 decades. Another promoter, Mr. Devendra Jain, is the civil engineer who has longstanding experience in project execution. Even though the company’s complete management is family centric, its promoters continue to be supported by experienced professionals in several fields to manage core activities. 

The company has a strong history of successful divestment of 37 projects. It was able to successfully divest 100% of equity stake in 3 HAM projects to Cube Highways (~49% ownership was divested during FY22 and the remaining 51% was divested during 9M22). As a result, it received consideration of INR160 crore for this during 9M23. 

Industry dynamics continue to work in favour of Dilip Buildcon Limited. Indian government with the help of National Highways Authority of India took several initiatives for improvement in the prospects of road sector. Such initiatives consist of bidding of tenders after 80% land gets acquired for the project, releasing 75% of arbitration award against submission of BG (bank guarantee) and 100% exit for the concerned developers once 2 years of project completion are completed. As per the Union budget 2023-24, there has been an allocation of INR2.70 lakh crore to Ministry of Road Transport and Highways. This exhibits ~10% jump in the allocation which was made under the budget 2022-23. Such huge allocation should be able to benefit the entire industry and renowned players should be able to capitalise these opportunities. That being said, the competition has truly increased in this sector in the last one year regarding bidder participation as there was some volatility which was observed in steel and cement prices.

In the business of roads and bridges construction, the company primarily designs, constructs and maintains roads, bridges and highways pursuant to EPC contracts and BOT contracts awarded. The company recognized revenue of INR7,22,309 Lakhs and INR7,65,227 Lakhs in FY22 and FY21, respectively. 

Stock of the company closed at INR301.15 on 8th August 2023. Over previous 1 month, the stock has gone up by over ~20%. In just 6 months, it has lapped up gains of ~42.4%. 

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