Vijay Shanthi Builders Ltd

BSE Code: 523724

CMP: Rs.21.60

Book Value: Rs.39.07

EPS: Rs.4.43

P/E: 4.88

Industry P/E: 14.51

Market Cap: Rs.56.57 Cr

Chartical Inferences: Buy above Rs.20.50

Target: Rs.25-29

Time: 3-4 months.

Medium Term Target: Rs.41-42 (50%-plus appreciation)

Introduction: Vijay Shanthi Builders Ltd is a Chennai based Real Estate Company, which is known to offer luxury apartments at affordable prices to discerning citizens. The Company currently has several projects under implementation and continues to explore newer opportunities. To rewind, a couple of years back; it merged High End Homes Private Limited into itself. Pursuant to this, the Company issued one equity share of Rs.10 each fully paid up, for every three equity shares held by the Shareholders in High End Homes Private Limited.

The Company runs a mineral water plant in the name of Vijay Shanthi. However, considering miniscule contribution (0.83%) of this segment to its top line, the Board of Directors had proposed to exit the Company from mineral water business from the FY11-12. As the assets deployed by the Company to this segment are very less, this decision would not involve any substantial sale / dilution in the value of assets of the Company.

Shareholding Pattern: The promoters hold 66.89% while the general public holds 33.11%. Thus the company has the controlling stake which helps in taking fast decisions.

Financials: For FY11, the company came out with wonderful set of numbers inspite of the slowdown in the real estate sector. The total income of the company for FY11 jumped to Rs.136.40 Cr as against Rs.68.18 Cr in the same period previous year. The PBT of the company for FY11 came out to be Rs.12.09 Cr as against Rs.3.25 Cr in the same period previous year. The net profit of the company for FY11 came out to be Rs.9.50 Cr as against Rs.2.66 Cr in the same period previous year. The EPS of the company on an expanded equity came out to be Rs.3.63 Cr in FY11 as against Rs.2.09 in the same period previous year.

For Q2FY12, also the company came out with good set of numbers. The total income of the company for Q3FY12 came out to be Rs.51.93 Cr as against Rs.33.61 Cr in the same period previous year. The net profit of the company came out to be Rs.3.80 Cr in Q3FY12 as against Rs.2.29 Cr in the same period previous year. The EPS of the company on an expanded equity capital came out around Rs.1.45, in Q3FY12. The net and operating margins of the company on Q-o-Q basis also improved in Q3FY11, though marginally.

Triggers:

(i) The demand for Housing continues to increase as ever, though the increase in lending rates by the Banks affected the off-take of home loans to a large extent, during the last 18 months. However, now with the RBI going in for the CRR cut and a hint towards softer interest rate regime in the coming days, the company is confident that with completion of various residential projects in the coming months, both its top and bottomlines, are set to witness a substantial increase.

(ii) Following are the on-going projects of Vijay Shanthi Builders Limited, which are expected to be revenue accretive in the coming days:

Project Name                                        Location

Lotus Pond                                                               Thaiyur

Infiniti                                                                     Mevalurkuppam

Park Avenue (Phase I)                                              Kandigai

Boulevord                                                                 Kandigai

Silent Valley                                                            Tambaram

Mystiq                                                                     Purasawalkam

The Art                                                                   Nunganbakkam

(iii) Vijay Shanthi Builders Limited has a land holding of 5507795 sq. ft (approx.) which is valued at Rs.1878 crores (approx).

(iv) The futures projects are the following:

Project	Name of the Location	Total Saleable Area
Serene	Perungudi	48000 sq. ft.
Aurum	Besant Nagar	85000 sq. ft.
Whistling Woods	NH4-Bangalore Highway	700000 sq. ft.
Calm Springs	Ratnamangalam Vandalur–             Kelambakkam	1500000 sq. ft.
Eternal Springs	Ambattur	500000 sq. ft.

Among the ongoing projects, the Lotus Pond and Infiniti are nearing completion where as the project: Park Avenue is on scheduled time. The work of other projects is going on full swing. Some of the new projects are at planning and some are at the approval stage.

(v) The Company’s projects are currently located in Chennai, Tamil Nadu only. Since Chennai has a lot of scope and potential, the Company plans to exploit all the opportunities provided by the city to the fullest. In the future the company might think of moving to other locations.

(vi) The expected annual turnover for FY12 could be between: Rs.200-210 Cr, with an expected EPS of Rs.5-6. The company is taking serious steps to reduce the debts, which as on 31.03.2011, stands at Rs.61.19 Cr.

(vii) The Company is consistently paying dividend to its shareholders, since the last 7 years. Due to the Company’s superb performance it has been ranked among the TOP 400 SMALL CAP CORPORATES OF INDIA in Dalal Street Journal's widely circulated and read "SMALLCAP 400, 2011".  Vijay Shanthi builders are the leaders of the High end segment projects and have been conferred  with the prestigious “ACCOLADES OF EXCELLENCE” – India’s Best Residential Project  award for their Unique project  “PATIO” from CNBC & CRISIL. A rare Honour reserved for a select few in the real estate industry. It’s the first and only home in Chennai to have been bestowed with this special privilege.

Conclusion: From the charts it has been found that the scrip has given a major breakout on last Friday (27th January, 2012), which if sustains in the coming days, could take the scrip to around Rs.24-26, in the short term. Considering all the factors mentioned above, investors can go in for the scrip, at the CMP of Rs.21.60, for a price target of Rs.35-37, in the next 3-6 months time frame. Moreover, a decent P/E rating of 10 can take the scrip to around Rs.41-42 in the coming days. The worst is over for the sector, as the rate cut by the RBI is imminent in the next 3-4 months.The investors with a slightly longer time view should hold the scrip in their portfolio.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on the recommendation or after reading the report.

The call made herein is for informational purposes and is not a recommendation to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness is not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrip mentioned in this column. Investors should take their own decisions while buying and  selling the shares/securities