Ajmera Realty & Infra India Ltd. CMP: 222

Ajmera Realty & Infra India Ltd (BSE: 513349, Ajmera)

CMP: 222

Real estate property sector outlook:

·      India’s property market sales are expected to grow at a 14% compound annual rate from 2016-20 and 18% from 2020-25.

·      The confluence of factors, including a projected sharp increase in the country's per capita income, further urbanization and a firmer federal hand on regulations, could push annual property market sales, which were $105 billion in 2015, to $462 billion by 2025, according to the Morgan Stanley report

·      There are many sectors, which can benefit directly or indirectly from this growth like: Real estate, Housing finance companies, Cement industry, Paints, Plywood etc.

The most important point is to select that company which has following qualities in the sector:

·      Capex or construction is finished and are ready for sale

·      Manageable debt (Important criteria for real estate company)

·      Good land banks at prime locations

·      Brand value and should have a mix of both Luxury and affordable homes

After considering all the above points I picked the company Ajmera Realty & Infra India Ltd

Ajmera analysis:

·      New generation lead by Dhaval Ajmera (MBA in finance from Cardiff University) has taken the firm into an elite brand without increasing the debt

·      Company can deliver 50%+ CAGR in sales and 60%+ CAGR in Profits from FY17-FY20 as per the management

·      Stock is available below its intrinsic value which provides safety, Dividend paying and is trading around 12 PE (and has historic PE of 20+) and is also cheap compared to its peers

·      Company posted a 54% rise in PAT yoy and 20.6% rise in pat qoq with increasing sales and reducing finance costs, company aims to be debt free in next 2 years

·      Trade receivables stand at 130+ crore at end of FY17 vs. 46 crore at end of FY16

·      Promoters hold a good 62.52% and have been buying from open market

·      Many projects are near completion whose numbers should start reflecting in 2-3 quarters

·      Company has recently won the Brand award at the World Greatest Brand’s Summit 2016-17 held at Dubai.

Some important statements taken from the FY16 Annual report:

Technical view point:

Stock has formed a cup and handle breakout in the monthly charts

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”