Visit http://indiaer.blogspot.com/ for complete details �� ��
Higher interest expenses dent earnings…
Hindustan Construction’s (HCC) Q2FY11 operating performance was
better than our expectation. However, the higher than expected interest
expenses led to lower than expected Q2FY11 results. Going ahead, we
expect execution to pick up on the back of a strong order book of Rs
19,735 crore and ramp up on two key orders worth Rs 5,585 crore. Also,
listing of Lavasa and improvement in working capital management
would be key catalysts for HCC’s stock performance. We maintain our
BUY recommendation with a price target of Rs 74.
Q2FY11 result below expectation; execution to pick up in H2FY11
HCC’s Q2FY11 operating profit grew 28.6% YoY, which was better than
our expectation. However, the adjusted net profit declined by 73.9%
YoY to Rs 7.7 crore, largely due to higher interest expenses. Going
ahead, we expect execution to pick up in H2 FY11 on the back of
ramping up of the road projects worth Rs 2860 crore and Kishanganga
projects aggregating Rs 2,725 crore.
Strong and well balanced order book ensures revenue growth
The robust order intake continued in Q2FY11 with HCC securing orders
worth Rs 1,178 crore mainly in the hydro, transport and metal
segments. The order book of the company stands at Rs 19,735 crore
(TTM order book book-to-bill ratio of 5.1x). Moreover, with the
increasing share of the private sector and balanced geographical
spread, HCC is better positioned to execute its strong order book.
Valuation
At the CMP, the stock is trading at a P/E of 7.4x in FY11 and 5.6x in
FY12E (after adjusting for real estate and BOT projects valuation).
Considering the strong order book ensuring FY10-FY12E earning CAGR
of 20.2% and potential value unlocking from Lavasa, we maintain our
BUY rating on the stock with an SOTP target price of Rs 74/share.
No comments:
Post a Comment