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Q2 disappoints; expect good FY12
Consolidated Construction Consortium’s (CCCL) Q2FY11
results came below expectations due to project
execution-related issues. Though operating margin was
impacted, the management has marginally lowered its
FY11 revenue growth guidance to 18% vs 20% earlier
(we factor 28% growth as we believe the management
is very conservative on growth assumption). We have
tweaked our FY11 and FY12 estimates, reducing PAT by
14% and 10%, resp. We maintain Buy with a revised
target price of Rs90 (earlier Rs101), considering 2HFY11
and FY12 revenue would be robust. CCCL remains our
least-preferred construction pick in the sector and we
advise investors to look at Ahluwalia Contracts (ACIL)
on better risk-reward profile (upside 47%).
�� Order-book at Rs45bn is 2.2x TTM revenue: CCCL
bagged orders worth Rs3.4bn in Q2FY11 (Rs21bn in
1HFY11). Q2FY11 order intake is < revenue of Rs4.9bn.
�� Increase in working capital employed expected:
CCCL witnessed a rise in working capital employed
(inline with our expectation) due to increasing debtor
days. The company also faced pressure from vendors
advancing payments.
�� Maintain Buy; but prefer ACIL over CCCL: The stock
price has already corrected by around 7% following the
disappointing Q2 results. At CMP, the stock presents
18% upside to our fair value of Rs90 (12x FY12E EPS of
Rs7.5). We, however, advice investors to consider ACIL
for 47% upside given its better risk-reward profile and
much better operational parameters vs CCCL.
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