Nagarjuna reported revenues of Rs12b (up 12.6% YoY): Motilal Oswal

Visit http://indiaer.blogspot.com/ for complete details �� ��

Nagarjuna Construction (NJCC IN; Mkt Cap USD0.9b, CMP Rs155, Buy)

-          NCC reported revenues of Rs12b (up 12.6% YoY) in 2QFY11, above our estimates of Rs11.4b (up 7.4% YoY). EBIDTA margins stood at 10.3% (up 7bp YoY.

-          Management has maintained FY11 guidance of an order intake at Rs100b (up14%), consolidated revenues at Rs73b (up 26% YoY).

-          Debt has increased from Rs17.8b as at Jun-10 to Rs20b as at Sep-10, largely given increased working capital requirement and investment in BOT projects.

-          All 5 road BOT projects are expected to be operational by Dec-10.  The company is expecting decision on the Andhra Pradesh Power project in two months.

-          Including international construction companies, we expect consolidated construction revenue CAGR of 23% and PAT CAGR of 24% over FY10-12.  At CMP, NCC trades at reported PER of 13.2x FY11, and 10.7x FY12E (consolidated construction earnings).We maintain Buy rating with a target price of Rs202 (core business at Rs144/share, 12x FY12E and BOT/RE investments at Rs35/share), upside of 30.9%.

Recent Highlights:
Operating results below estimates: Bharti reported 2QFY11 revenue of Rs152.2b (est of
Rs153.4b), EBITDA of Rs51.2b (est of Rs53.7b), and net profit of Rs16.6b (est of Rs16.5b).
Consolidated numbers are not comparable due to full quarter consolidation on African
operations. Consolidated EBITDA was lower than estimates due to flat revenue and margin
pressure in the India mobility business and lower margins in the Africa business. India and
South East Asia margins were impacted by increased site rollout, higher diesel prices, and
full quarter impact of wage incrementtaken from Jun-10. However, reported PAT was inline
led by forex gain of Rs2.5b, although partially offset by higher tax rate


RPM stabilization in India and usage elasticity in Africa key positives: While mobile
traffic for India operations remained flat QoQ due to seasonality, RPM decline of only 1%
QoQ to Rs0.44 was the lowest in past seven quarters.Mobile ARPU declined 19.8% YoY

and 6.2% QoQ to Rs202 (vs estimate of Rs207). In Africa business, early signs of positive
elasticity are encouraging as ARPU remained steady QoQ at US$7.4 despite an 8% RPM
decline (led by tariff cuts taken in 10/16 markets). Subscriber base increased by ~10% QoQ
to 40.1m.


Valuation & View
We are downgrading our EBITDA estimates by 2-3% and PAT estimates by ~2% to factorin
ower margins. However, revenue and EBITDA growth in India operations is expected to
rebound sharply driven by 1) normalization of traffic growth, 2) lower RPM decline, and 3)
launch of 3G services. At CMP of Rs328, the stock trades at proportionate EV/EBITDA of 9x
FY11E and 7x FY12E. Maintain Buy with a revised target of Rs410/sh based on 8.5x EV/
EBITDA for India business and 7x EV/EBITDA for Africa business.