B L Kashyap and Sons Ltd (BLK) is a construction and infrastructure development company with a pan India presence. The company's service portfolio extends across the construction of factories and manufacturing facilities, IT campuses, commercial and residential complexes, malls and hotels. The company's operations extend over North, South and Western India and are coordinated through the corporate office at New Delhi and regional offices at Bangalore and Pune

BLK currently has an order book of Rs. 2000 crs. Whereas the company has L1 status for approximately Rs. 200 crs worth of orders.

The company expects to get new orders worth approximately Rs. 2000 crs to Rs. 2500 crs in FY 2010.

The Management expects revenue to grow at 7% to 8% for FY 2010.

EBITDA margins are expected to stabilize between 7% to 9% for FY 2010.

BLK currently has debt of Rs. 320 crs. Whereas it has a cash balance of Rs. 22 crs.

EBITDA margins declined 384 bps y? o? y to 8.0% in Q1 FY10 as compared to 11.9% in Q1 FY09. However on a q? o? q basis EBITDA margins improved 500 bps.

BLK reported PAT of Rs. 7.9 crs in Q1 FY10 registering decline of 77.9% y? o? y. However on a q? o? q basis PAT increased by 370.4%.

BLK currently has an order book of approximately Rs. 2000 crs as on July 2009. The order book is divided across segments with Public Sector Units and Infrastructure segment comprising only 6.3% of the order book or Rs. 125 crs. Whereas the slow growing construction area of hotels, industrial, commercial & retail, IT and residential contributes 20%, 8%, 21.8%, 22% and 22% respectively.

Decline in revenue is attributable to conscious slowdown by the management so as to not to increase the debtors position of the company and due to overall project slowdown. We believe with the improvement in economic scenario the company should once again witness improvement in project execution thereby witnessing growth in top line of the company going forward. Furthermore, the management has said that it expects revenue to grow in the range of 7% to 8% for FY 2010. BLK has reported revenues of Rs. 213.1 crs in Q1 FY10 which leads us to believe that in

order to meet the revenue guidance the company has too report revenues of approximately Rs.
1300 crs over the next 3 quarters which gives average revenues of Rs. 400 crs approx over the next three quarters.

In order to boost the order book BLK took projects which had lower margins. This trend is clearly reflected in the EBITDA margin trend witnessed by the company. EBITDA margins have declined from 11.9% in Q1 FY09 to as low as 3.1% in Q4 FY 09. However margins improved in Q1 FY10 to
8.1%. Going forward the management expects EBITDA margins to sustain between 7% and 9%. BLK currently has exposure to the real estate industry through its wholly owned subsidiary Soul Space Realty Limited (SSRL). The company has made investments worth approximately Rs. 250 crs in SSRL. BLK is currently developing four projects along with its Joint Venture partner. Out of the above one project has been completed and whereas the rest three are under construction. However due to the sharp slowdown in the real estate sector the company has decided to exit the real estate business completely.

BLK is looking to monetize its real estate assets and is looking to raise approximately Rs. 100 crs to Rs. 120 crs through sale of some of its assets. Furthermore the company has appointed consultants for sale of some of its retail spaces as and when they get completed. The company is looking to sell
400000 square feet of space which is expected to fetch approximately Rs. 150 crs to Rs. 175 crs. Going forward, the company has decided to exit the real estate business completely and expects to raise approximately Rs. 250 crs to Rs. 295 crs from sale of its real estate assets. The company expects to make a profit of around Rs. 50 crs to Rs. 100 crs on its real estate investments. Furthermore the company has made a conscious effort to enter the infrastructure space recently. Out of the total order book of Rs. 2000 crs infrastructure contributes approximately 6.3% or Rs.
125 crs. Going forward the company will be bidding aggressively in the infrastructure space given the huge infrastructure spending expected by the government.

BLK currently has an order book of approximately Rs. 2000 crs as of July 2009. The company has an order book to sales ratio of 1.37x as compared to industry average of 2.76x. The company has a D/E ratio of 0.8, whereas it has interest coverage ratio of 6.09x. BLK has EBITDA margins of 8.7% as compared to industry average of 11.5%. Whereas net margins are 5.0% as compared to an industry average of 4.8%. On the valuation front, BLK is currently trading at a trailing P/E of 9.53x as compared to an industry average of 15.23x. Whereas on the EV/EBITDA basis it is currently trading at 7.75x as compared to an industry average of 9.20x. BLK is currently trading at 1.85x P/BV which is lower than the industry average of 2.04x

BLK currently has an order book of Rs. 2000 crs as of July 2009. Going forward the company expects to achieve sales growth of 7% to 8% for FY 2010 or revenues of around Rs. 1500 crs. Whereas the management expects EBITDA margins to sustain between 7% to 9% i. e. EBITDA of approximately Rs. 120 crs for FY 2010. This will lead to a PAT of Rs. 78.2 crs and EPS of Rs. 38.1 for FY 2010. We feel the company's performance has hit a bottom and with the industry scenario expected to improve going forward and the company being one of the leading players in the industry is also expected to do well. At Rs. 38.1 EPS expected for FY 2010. The stock is trading at
9.5x P/E which is cheaper than the industry average. Apart from this the low debt equity will enable BLK to raise debt for future growth.

Technically the structure looks positive and the stock has consolidated a lot in the range of 400?
300 and as build a strong base and is ready for a move if it maintains above its previous intermediate top of 402. If we look at the past record the scrip has made a double bottom of 87 on
12th and 13th March' 09 and has retraced upto 486 on 05th June'09. If we go by the retracement theory the first support level comes at 350 which is the 33.3% retracement and the second is 287 which is the 50% retracement of the entire rally from 87 to 486. Support is placed at 335?305 and its 200? day moving average is placed at 278. Unless we see a break below this level we don't see any kind of weakness in the counter. Liquidity is the only big concern as the average volume in the counter is around 50K shares. The short term target looks 440 and in the medium term 550.

Quarterly Result Analysis

BLK reported revenues of Rs. 213.1 crs in Q1 FY10 as compared to Rs. 414.1 crs in Q1 FY09 thereby registering decline of 48.5% y? o? y. Whereas on a q? o? q basis revenues declined 25.2%

The company reported an EBITDA of Rs. 17.2 crs in Q1 FY10 as against an EBITDA of Rs. 49.2 crs in Q1 FY09. Decline in EBITDA is due to increase in Wages & Employee costs & Other Expenses. Wages & Employee costs as a percentage of revenues increased to 34.2% in Q1 FY10 as compared to 28.7% in Q1 FY09. Whereas Other Expenses as a percentage of revenues increased to 5.9% in Q1 FY10 as compared to 5.0% in Q1 FY09. However on a q? o? q basis EBITDA registered strong growth of 97.3%

EBITDA margins declined 384 bps y? o? y to 8.0% in Q1 FY10 as compared to 11.9% in Q1 FY09. However on a q? o? q basis EBITDA margins improved 500 bps

Depreciation expenses declined by 14.5% to Rs. 4.1 crs in Q1 FY10 as compared to Rs. 4.5 crs in Q1 FY09

Interest expense stood at Rs. 9.1 crs in Q1 FY10 as compared to Rs. 4.5 crs in Q1 FY09 Registering increase of 99.5% y? o? y and 48.5% q? o? q

Tax expense declined 69.7% y? o? y to Rs. 4.3 crs in Q1 FY10 as compared to Rs. 14.3 crs in Q1 FY09. However on a q? o? q basis tax expense increased 83.9%

BLK reported PAT of Rs. 7.9 crs in Q1 FY10 registering decline of 77.9% y? o? y. However on a qo? q basis PAT increased by 370.4%

PAT margins declined 495 bps to 3.7% in Q1 FY10 as compared to 8.7% in Q1 FY09. However on a q? o? q basis PAT margins improved 313 bps.