At nearly 1-year high, this smallcap stock is still a buy with 32% upside

NEW DELHI: Shares of Nesco - the diversified commercial services company - have recently received price target upgrades by Equinomics Research & Advisory Private. The research firm, considering the recent traction in the stock price of Nesco to close to its highest in a year, has revised the target price higher to Rs 850 per share which is 20.2x its FY2024E EPS of Rs 42. This at the last traded price of Rs 645.5 will result in potential upside of close to 32 per cent.

The research firm has moved the target price higher as the Maharashtra government’s department, MCGM, has vacated all the halls owned by Nesco that were previously being deployed for Covid care. “This announcement is highly positive for Nesco as this will free up a significant space of the Bombay Exhibition Centre”, said the company’s report.

Further as normalcy in travel has been restored, the research firm expects that the firm shall return to normal profits. As it is there is seen high participation for the ChemExpo event scheduled in 2023.

Other boosters for the scrip shall be the start of the Mumbai Metro in front of Nesco property within fiscal year 2023 and also the push seen in the real estate prices.

“Nesco is sitting on huge free cash despite substantial expansion of its fixed assets over the years – free cash as on March 31, 2022, stood at Rs 835 crore which is 18 per cent of its current market cap. This cash would help the company to part-finance as a series of expansions it has planned”, adds the report.

Also, the company’s potential land development can increase earnings multifold for the company in the long term.

“Most of the demand will be in Mumbai at 6.18 million square feet. Therefore, we see the possibility of an enormous jump in the valuation of Nesco once the new Corporate Parks are launched and more land parcels are put into commercial use over the next 4 to 10 years. Hence, we revise our target price for NESCO from Rs 750 to Rs 850, which is 23.0x FY2023E EPS of Rs 37 (upward revised) and 20.2x FY2024E EPS of Rs 42 (upward revised) and continue to reiterate a buy”, added the report.

Nesco is a small cap real estate company in existence for over 8 decades now. The company has transitioned from being a renowned engineering entity to a diversified conglomerate.

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