Buy B L Kashyap and Sons with Long term
Large projects in hand for real-estate companies and the increasing need for space by corporates has not only led to a boom in the realty sector but also created strong demand for quality construction contractors. B L Kashyap & Sons is among the few organized contractors in the listed space who have managed to capitalize on this ‘excess of demand over supply’ scenario. A compounded annual growth of 61 per cent and 93 per cent in sales and net profits, respectively, over the last five years suggests that the company has made the most of the boom.
B L Kashyap’s comfortable order backlog, its resilience to the steep hike in raw material costs and relatively shorter execution cycles provide medium-term earnings visibility with moderate risks.
Investors looking at a proxy for the relatively risky real-estate development business can consider exposure to the relatively less risky business of construction contract through the stock of B L Kashyap & Sons. As the stock has witnessed weakness since the beginning of 2008, investors should accumulate it in phases, taking advantage of declines. An investment horizon of two-three years is necessary to participate in the company’s growth.
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