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Outlook and Valuation: We have valued MEPs projects using the free cash
flow to equity holders (FCFE), applying a 14% discount rate. Considering (1)
toll rate hike across Mumbai 5 Entry points project, (2) regular churn of new
shorter duration projects, and (3) 5 projects getting completed by September
2016, we arrived at a consolidated FCFE value of ~Rs850cr. In absence of
data, our estimates do not capture any FCFE value for (1) Jammu-Udhampur
OMT project (NHAI has announced MEP as H1), and (2) Delhi Entry points
OMT projects.
MEP post-issue would have market capitalization of ~Rs1,042cr – Rs1,065cr (at
price band of Rs63-65/share), which is higher than MEPs FCFE value of ~Rs850cr.
Considering limited data for 2 recently won projects, we see limited upside for the
stock from its issue price and hence recommend NEUTRAL on the issue.

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