Independent Investor and Research Analyst

Madhukar Ladha

Equity Bottom-Up

Nesco continues to be a strong real estate rental story. Its land parcel near Mumbai airport allows for excellent monetization avenues which the company recognizes and has embarked upon. While earnings will be flattish over the next six quarters, the next leg up in earnings will start trickling in from rental income of IT park 4 in the March/June 2019 quarter. The market probably will start pricing in the project once substantial construction is complete around December 2018/March 2019 and first few tenants come in and in that sense, the target price may be achieved sooner.Beyond FY19, Nesco has extensive plans to develop New Bombay Exhibition Centers (NBECs) 1-4 over the next 10-12 years which will provide for further growth. Nesco plans to fund growth through internal cash flow, without debt or equity issuance, which makes the stock even more attractive.Overall Nesco has a great location advantage in Mumbai. It has formidable plans to build rental assets in IT and the business exhibition space. As the economy picks up and businesses start spending more on promotions demand for conventions and exhibitions should also increase and drive rental incomes higher. While in the near-term stock appears fully valued, the stock may outperform substantially closer to completion of its fourth IT park. Stock should be held as part of core portfolio unless the business shows any sign of deterioration.Buy for March, 2020 target price target of Rs.853 (+65%).

Nesco continues to be a strong real estate rental story. Its land parcel near Mumbai airport allows for excellent monetization avenues which the company recognizes and has embarked upon. While earnings will be flattish over the next six quarters, the next leg up in earnings will start trickling in from rental income of IT park 4 in the March/June 2019 quarter. The market probably will start pricing in the project once substantial construction is complete around December 2018/March 2019 and first few tenants come in and in that sense, the target price may be achieved sooner.Beyond FY19, Nesco has extensive plans to develop New Bombay Exhibition Centers (NBECs) 1-4 over the next 10-12 years which will provide for further growth. Nesco plans to fund growth through internal cash flow, without debt or equity issuance, which makes the stock even more attractive.Overall Nesco has a great location advantage in Mumbai. It has formidable plans to build rental assets in IT and the business exhibition space. As the economy picks up and businesses start spending more on promotions demand for conventions and exhibitions should also increase and drive rental incomes higher. While in the near-term stock appears fully valued, the stock may outperform substantially closer to completion of its fourth IT park. Stock should be held as part of core portfolio unless the business shows any sign of deterioration.Buy for March, 2020 target price target of Rs.853 (+65%).

India

Nesco Ltd. is a diversified company involved in manufacturing and engineering products for railways and forging, realty development, and runs an exhibition center.

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NESCO (NESCO IN)

Nesco - It's All About the Location!

Nesco continues to be a strong real estate rental story. Its land parcel near Mumbai airport allows for excellent monetization avenues which the...

Madhukar Ladha

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