In the last two years, residential realty has fallen off a cliff. Demonetisation and the implementation of Real Estate Regulatory Authority (RERA) have contributed to this lull.
But now, there are signs of a revival this year. While implementation of RERA made road difficult for small unorganised developers, industry participants believe it could cause consolidation. This is good news for organised construction companies .
For Capacite Infra, the order inflow in FY18 exceeded internal targets by Rs 900 crore. Rohit Katyal, director and CFO, said the number of orders as well as their size and scope were increasing.
"The company takes pride in the strong operational efficiencies being exhibited at the project sites, which is reflected in the repeat order intake that accounts for 45-50% of the orders booked during FY18," said Katyal. "The company, however, continues to actively work on adding new accounts."
While residential segment forms over 87% of Capacite’s Rs 5,800 crore orderbook, it is hopeful of more commercial investments from the likes of Ikea, Amazon, Brookfields, Embassy, Samsung, Airtel in the near future.
The company believes that with the completion of Trans Harbour link and Navi Mumbai Airport, Mumbai MMR market, which forms 85% of companies orderbook, will see contracts worth Rs 10,000 crore over the next few years.
However, the picture is not all rosy. While the improvement in industry sentiment brings music to ears, it also creates a risk of workmen attrition.
Additionally, with general elections fast approaching, investment in real estate might slow down in 2019.
The ease and availability of funds also creates a risk due to the recent issues toppling the Indian banking sector. Also the fact that PE investors such as Paragon Partners and New Quest might look to book profits may create nervousness in investors mind.
Capacite Infra, which listed on bourses in September 2017 is currently trading below the listing price.
Started in FY13, its revenue grew at a rapid pace of 75% compounded rate over FY14-17 albeit at a low base. But going forward, the analysts estimate the growth rate to moderate around 25-35% CAGR over next three years.
Barring the impact of GST, the management said they would be closer to the FY18 guidance and will also be able to maintain the historical margins.
The company is also looking to bid for selective government projects and metro station orders. It may augur well for the company’s orderbook.
The management said that one of the key focus areas for the company in FY19 would be to further improve cash profits and reduce working capital cycle by 8-10 days.
The analysts believe that with the technological prowess and ability to complete projects in a timely manner, the company stands to gain vs peers and improve it's asset turnover.Given the positive outlook, the analysts peg a consensus target price around 415-430 per share giving it a valuation of 19 times FY19 earnings.