ICSA (India) Ltd is a unique combination off the EPC business in the space of T&D infrastructure creation and embedded solutions and services. The company is providing technology solutions to the Indian power sector and telecommunication sector with the objective to identify transmission and distribution losses and monitor power consumption. They also provide rural electrification, construction of sub stations and conversion of LT line to HT lines.The Company operates through two segments: Software Division and Power Division. They are headquartered in Hyderabad, India with their operating location across the world. The company shares are listed on the Bombay and National stock exchanges.
The governments renewed focus on providing electricity to all households in the country augurs well for ICSA India's growth prospects, but problems in cash generation make it bit dicey, ideal for those with risk appetite. Besides focus on Power as a growth sector is also a definitive plus for the stock. The company earns over 90% of its revenues from public sector entities.
Website: http://www.icsa-india.com
Financials:
ICSA has grown at break-neck speed in last few years. In the two years ended March 09, the company's revenue jumped four fold to Rs 1,111 crore. Net profit trebled during the period to Rs 168 crore. The company has maintained its operating margin between 25-27 % during this period. In recent quarters, while the top line growth has remained robust, its bottom line has been impacted due to rising interest expense. The interest charge is rising since the company has to borrow to meet its working capital requirement due to poor cash generation from operations.
The governments renewed focus on providing electricity to all households in the country augurs well for ICSA India's growth prospects, but problems in cash generation make it bit dicey, ideal for those with risk appetite. Besides focus on Power as a growth sector is also a definitive plus for the stock. The company earns over 90% of its revenues from public sector entities.
Website: http://www.icsa-india.com
Financials:
ICSA has grown at break-neck speed in last few years. In the two years ended March 09, the company's revenue jumped four fold to Rs 1,111 crore. Net profit trebled during the period to Rs 168 crore. The company has maintained its operating margin between 25-27 % during this period. In recent quarters, while the top line growth has remained robust, its bottom line has been impacted due to rising interest expense. The interest charge is rising since the company has to borrow to meet its working capital requirement due to poor cash generation from operations.
| CMP | 195 | |||
| MCap.(Rs. in Cr.) | 926 | |||
| BV (Rs.) | 125.9 | 3 Yr CAGR Sales (%) | 214.79 | |
| P/E (x) TTM | 5.57 | 3 Yr CAGR Profit (%) | 207.97 | |
| EPS (Rs.) TTM | 35 | Promoter Shareholding (%) | 20.64 | |
| FV (Rs.) | 2 | FII | 39.32 | |
| YTD Sales Growth | 20 - 50 % | Liquidity | High |
Risks:
The company has to fund its operations through external financing since its operations are not generating enough cash. This is on account of very high level of receivables. This can prove to be a major concern for ICSA especially during tough economic situations when external funding comes at a higher cost.
Valuations and investment rationale:
At the current price level of around Rs 195, ICSAs stock is traded at a trailing twelve month price earnings (P/E) multiple of 5.57. Since there is no other listed player of ICSAs size that can match its business operations, it is difficult to build a comparative scenario. Many of the frequently traded small-cap technology companies are traded at a P/E of more than 9. The company has Rs 2,000 crore strong order book to be executed within next two years. Of this, the infrastructure services account for Rs 1,400 crore. With R-APDRP now in place, ICSA is likely to see buoyancy in its embedded solutions revenue. This is a good sign since the division earns better margins compared to the infrastructure business.
In view of its future prospects and the risk attached with it, investors with higher risk appetite can consider ICSA with a horizon of two years. ICSA is a potential multibagger in the long run
Source: Economic times, Moneycontrol and other sites
The company has to fund its operations through external financing since its operations are not generating enough cash. This is on account of very high level of receivables. This can prove to be a major concern for ICSA especially during tough economic situations when external funding comes at a higher cost.
Valuations and investment rationale:
At the current price level of around Rs 195, ICSAs stock is traded at a trailing twelve month price earnings (P/E) multiple of 5.57. Since there is no other listed player of ICSAs size that can match its business operations, it is difficult to build a comparative scenario. Many of the frequently traded small-cap technology companies are traded at a P/E of more than 9. The company has Rs 2,000 crore strong order book to be executed within next two years. Of this, the infrastructure services account for Rs 1,400 crore. With R-APDRP now in place, ICSA is likely to see buoyancy in its embedded solutions revenue. This is a good sign since the division earns better margins compared to the infrastructure business.
In view of its future prospects and the risk attached with it, investors with higher risk appetite can consider ICSA with a horizon of two years. ICSA is a potential multibagger in the long run
Source: Economic times, Moneycontrol and other sites
NOTE: It is safe to assume I have vested interest in the stock and standard disclaimers apply
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