MEP Infrastructure Developers Ltd: Fully valued!
(BSE Code: 539126) (CMP: Rs.138) (FV: Rs.10)
Mumbai-based MEP Infrastructure Developers Ltd (MEP) is a leading infrastructure operator and toll management company focused on serving central and state road authorities for managing, operating and maintaining their road assets. With a presence across 12 states in India, it is an end-to-end service provider covering operate, maintain & transfer (OMT) services, toll collection, BOT assets and construction of bridges. It maintains and operates roads, highways, flyovers and bridges and also collects toll on behalf of its clients. Through its subsidiaries, it has completed 95 projects in 12 states, many of which are first of a kind, including 182 toll plazas and 1,086 lanes. It undertakes toll collection at the Rajiv Gandhi Bandra-Worli Sea Link in Mumbai since 2009. MEP launched its IPO in April 2015 to raise ~Rs.324 crore at Rs.65/share to retire some debt and meet additional working capital requirement. We had identified this stock as a potential multibagger on 16 January 2017, considering its performance in the preceding six quarters, slew of huge orders and management optimism coupled with 35% discount in its then market price of Rs.40/share compared to its IPO price. Also, the stock was trading at a historically low P/E compared to its peers at that time. The stock has been northbound on the bourses over the last five months on flurry of news - huge order win worth Rs.325 crore from MSRC, talks with two large overseas funds to form a joint venture to bid for road projects under the new toll-operate-transfer model, improved investor sentiment towards Infrastructure Investment Trusts (InvITs) and low floating stock due to high promoter holding. The stock has given phenomenal returns of more than 3x post our recommendation. It is advisable to book profits and take money off the table as we feel the valuation (equity: Rs.162.57 crore; FY17 EPS: Rs.6.7) is a bit stretched now.