Punj Lloyd- Sedate results continue:: Kotak Sec

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Punj Lloyd (PUNJ)
Construction
Sedate results continue. Punj Lloyd reported a 31% decline in consolidated revenues
to Rs19.9 bn, 10% below our estimates. Libyan orders started execution contributing to
about 8.5% of the 2Q revenues. EBITDA margin expanded by about 180 bps yoy likely
led by absence of any one-off costs in the quarter. Despite the revenue disappointment
the company met our PAT-level estimate led by lower tax expense. Moderate inflows of
Rs10 bn; backlog remains flat on a sequential basis. Reiterate REDUCE.





Sedate results - PAT broadly inline; EBITDA margin improvement likely led by absence of one-offs
􀁠 Disappointing revenues at consolidated and standalone level: Punj Lloyd reported
disappointing revenues of Rs19.9 bn in 2QFY11, about 10% below our estimates and down
31% on a yoy basis. The company reported start of execution of the Libyan orders which
contributed to about 9% of the quarter’s revenues. Even at the standalone level the company
has recorded a 43% yoy decline in revenues and 5.6% decline on a sequential basis.
􀁠 Margin improvement likely led by absence of one-offs: Punj Lloyd reported a 180 bps yoy
increase in consolidated EBITDA margin to 9.2%, likely led by absence of one-off costs
(reflected in lower raw material costs as a percentage of sales).
􀁠 Net PAT at Rs215 mn - broadly inline: Despite the miss at the revenue level, the company
reported a net PAT of Rs215 mn, broadly inline with our estimate primarily due to lower tax
rate in the quarter. Effective tax rate in 2QFY11 was at 18%.

Relatively sedate order inflow; backlog remains flat on a sequential basis
Punj Lloyd reported sedate inflows of Rs10.3 bn, down 29% yoy and 69% on a sequential basis.
Sedate inflows led to a 1HFY11-end backlog of Rs255 bn relatively flat on a sequential basis. The
backlog continues to be dominated by the infrastructure segment - contributing to 71% of total.

Lower working capital on back of higher liabilities leads to increase in net cash position
Punj Lloyd reported a Rs5.8 bn decline in net working capital level primarily led by higher current
liabilities. The working capital reduction led to an increase in the cash balance by Rs5.7 bn leading
to an improved net debt to equity ratio of 1X versus about 1.25X at end-FY2010.


Retain estimates; reiterate REDUCE with a target price of Rs140/share
Retain estimates of Rs9.8 and Rs12 for FY2011E and FY2012E respectively and TP of Rs140.
Reiterate REDUCE rating on (1) slower-than-expected pick up in execution of Libyan orders, (2)
high debt levels and (3) potential for further one-off losses in certain orders.