Punj Lloyd: Another Disappointing Quarter:: Citi

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


Punj Lloyd (PUJL.BO)
Alert: Another Disappointing Quarter

 PAT down 55% YoY – Punj Lloyd’s 2QFY11 PAT at Rs239mn was down 55% YoY
and was 28% below CIRA expectations of Rs333mn. Despite EBITDA margins of
7.8% which was ahead of CIRA expectations of 6.0% PAT was well below
expectations on account of sales of Rs19.6bn which was down 32% YoY and
higher-than-expected capital costs (interest and depreciation).

 Order backlog down 5% YoY – At Rs255bn as there were order cancellations in
1QFY11. 39% of the Rs255bn backlog consists of delayed Libyan orders.

 Maintain Sell (3M) — Though Punj Lloyd has been a significant underperformer
over various time frames, the company has outperformed the BSE Sensex by 12%
in the last one month due to investors’ interest in buying it as a laggard play.
However, we once again re-iterate that discretion is the better part of valour and
maintain our Sell/ Medium (3M) risk rating with a target price of Rs111.

 And the reasons for the same are — (1) 39% of the Rs256bn backlog consists of
delayed Libyan orders, (2) Order cancellations in 1QFY11 implied that despite
inflows of Rs32.8bn, backlog is down to Rs256bn (1QFY11) from Rs278bn
(FY10), (3) Recent top and middle management departures, (4) Deterioration in
working capital intensity/ client advances and (4), If arbitration proceedings
against ONGC fail, the company will have to write off Rs3.1bn (Rs9/share).