GPT Infraprojects Ltd

A typical 2 pager explaining why the company seems interesting.

GPT Infraprojects Ltd (GPT) is a construction company engaged in executing civil and infrastructure projects. It also manufactures concrete sleepers for railways. 

Infrastructure Segment - In the infrastructure vertical, the Co is engaged in construction and repair of railway bridges, road building and the construction of railway tracks

Concrete Sleeper Segment - The Co manufactures various types of sleepers for railway tracks such as Monoblock sleepers (for broad gauge, dual gauge and cape gauge), Line sleepers, PSC sleepers, Bridge deck sleepers, Level crossing and switch expansion joints.

Segmental Revenue
Infrastructure - 88% in FY23 vs 77% in FY19
Concrete Sleepers - 12% in FY23 vs 23% in FY19

Manufacturing Capacities
GPT has manufacturing units at various locations. Its capacity (units p.a) stands at - Panagarh, Bengal - 480,000 ; Ikari, UP 400,000; Pahara, UP 400,000; South Africa 500,000; Namibia 200,000.

Clients
GPT has some of the largest and prestigious railway customers in India, Asia and Africa such as Indian Railways, IRCON International Ltd, TransNamib Holdings Ltd, National Highways and Infrastructure Development Corporation Ltd and many more. 

Order Book
The Co. had an order book of Rs. 2288 crores as of June 2023. 

Order book of infrastructure segment (88%) – 2022 crores

Order book of concrete sleeper segment (12%) – 266 crores

The Co has bagged orders Rs. 600 crores in Mumbai.

Major Projects in Order Book

Credit Rating: BBB-

Qualified Opinion in FY21

The independent auditor has given its qualified opinion on the financial statements of the Co due to lack of financial controls w.r.t evaluation of recoverability of unbilled revenue, accrued price escalations and trade receivables on construction contracts completed three years ago.

ESM Framework

GPT Infra is a part of ESM 2 framework and hence a circuit filter of 2% is applied on the stock. The stock remains in this framework for a minimum of 1 month and GPT Infra has almost completed the stipulated period at the time of writing. In all probabilities the market cap will be >500 crores (currently at 494 crores) and hence will not enter the ESM framework again. This remains to be seen.

Estimates, expectations & valuations

Sales: Company reported Rs.236cr as sales in Q1FY24. As in every infrastructure company, H2 is usually heavier than H1 and we feel the company can comfortably post >Rs.1000 crore for the year FY24. We also expect the company to reach 1400 crores of sales in the next 2 years.

Margins: GPT has historically been able to maintain its margins in the range of 13% to 15%. EBITDA margins were subdued for FY23 due to pre operating expenses incurred for the capex in Ghana. Margins have reverted back to 13.5% in Q1FY24 and we expect the company to maintain these margins.

Debt & Interest Expense: As of FY23 company had a consolidated debt of Rs.250 crores. This was reduced and stands at Rs.202 crores at the end of June 2023. Company further expects a one-time payment of Rs.60 crores in October 2023 as payment from tribunal won and will use the proceeds to repay debt and bring it down to Rs.150 crores. Company incurred an interest cost of Rs.37 crores in FY23. We feel this cost will be <Rs.30 crores in FY24 and will come down even further in the next couple of years.

Valuations: GPT has a 10 year PE average of 19.6 and median of 18.65. The company’s 10 years average ROCE has been 10%. We feel The company can command a multiple of 13 to 15 times on earnings and clock an EPS of Rs.20 in the coming years.

Disclaimer:

PARTH KOTAK (PROPRIETOR: PLUS91) is a SEBI Registered (SEBI Registration No. INA000018081) Investment Advisory Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent an investment advice or a recommendation or a solicitation to buy any securities.