Q3FY24 Review: Capacite Infra: Stronger B/S to drive better execution

16 Feb 2024 , 02:03 PM

Capacite posted YoY flat revenue and ended M9FY24 with 5% YoY decline constrained by tight funding. Post the Rs2bn fund raise in Jan-24, mgmt. expects faster execution of the Rs96.7bn OB to support Rs18-19bn revenue in FY24. FY25 should see 25% YoY growth backed by improving execution of CIDCO and MHADA projects. Higher non fund based limits should aid bidding and order inflows as well as help release retention receivables to lower WC needs and debt levels. Analysts of IIFL Securities raise their TP to Rs320 (14x FY26 PER). BUY 

Sluggish execution in M9; execution to pick up post fund raise: 

Capacite Infra posted YoY flat revenue in Q3FY24 resulting in revenue declining 5% YoY during M9FY24. This was led by constrained funding limits. Post the equity raise of Rs2bn in Jan-24, management guided uptick in execution with Q4 with FY24 revenue guidance of Rs18-19bn implying Q4 revenue of ~Rs6bn – up 32% QoQ. This should further sustain in FY25 with expectation of 25% YoY growth supported by healthy execution at CIDCO and Mhada as well as other orders in the Rs96.7bn order book. Ebit margin including other income should sustain at ~12.5% as per the management. 

More freedom to bid for and win new projects: 

Tight funding situation had also impacted ability to bid for new projects due to requirement of furnishing BGs. As a result M9FY24 order inflow stood at only ~Rs17.25bn with end Q3FY24 OB of Rs96.7bn. Company is the lowest bidder in one project and expects two other repeat orders totalling to ~Rs5bn in Q4. Beyond these, there is a bid pipeline of Rs290bn across commercial buildings, hospitals, educational institutes, and housing which should aid order inflows for the company. 

Strong focus on controlling working capital: 

Management highlighted that working capital levels improved from 152 days in H1FY24 to 123 days aided by focus on receivables (flat QoQ) and higher creditors. Management expects sharp fall in retention receivables (helped by higher non fund based limits) over the next 2-3 quarters. Gross debt was down marginally to Rs3.45bn (0.27x D/E).