Punj Lloyd Slow But Sure, HOLD :: Emkay

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

Punj Lloyd

Slow But Sure, Maintain HOLD

HOLD

CMP: Rs 125                                       Target Price: Rs 132

---

n     Punj Lloyds performance exceeds expectations – APAT at Rs239 mn versus expectation of Rs182 mn

n     Reports impressive Ebidta margins of 9.2%- highest in last 8 quarters- despite UK 1.2 mn provision in Simon Carves

n     Revenues of Rs1.7 bn booked on Libya project – progress underway but remains below expectations

n     Confident on current order backlog and negates repetition of past concerns – retain FY12E estimates and Maintain HOLD rating with price target of Rs132/Share

Punj Lloyd Q2FY11 performance exceeds expectations – APAT at Rs239

mn versus expectation of Rs182 mn

Punj Lloyd Q2FY11 performance exceeds expectation – APAT at Rs239 mn versus

expectation of Rs182 mn. Other key positives of Q2FY11 performance are as under (1)

revenue decline of 31% yoy to Rs19.9 bn, but up 15% qoq (2) Ebidta decline 37% yoy

to Rs1.8 bn, but up 37% qoq and (3) APAT decline of 55% yoy to Rs239 mn, but turns

profitable on qoq basis – all headline numbers remain above expectation. Punj Lloyd

reports impressive Ebidta margins of 9.2%- highest in last 8 quarters. This is despite UK

1.2 mn provision in Simon Carves.

Revenues booked on Libya orders, but execution remains lower then

expectation

Progress in Libya is underway – with revenues of Rs1.7 bn booked on civil projects in

Libya. This is w.r.t to US$ 800 mn order placed on Punj Lloyd India operations. Further,

advances are received on US$ 800 mn orders – divided into 5 projects. However, no

progress is reported on US$ 1.2 bn orders placed on Sembhawang – execution is

pushed in FY12E. Though, Libya has reached revenue booking stage, progress remains

below expectations.

Punj Lloyd is confident on current order backlog, negates repetition of

past concerns

Punj Lloyd addresses investor concerns on existing order backlog w.r.t (1) execution (2)

advances and (3) recurrence of slippages, cost overruns and liquidated damages in

order execution. Putting recent events under cold storage, Punj Lloyd remains

reasonably confident on current order backlog for non-recurrence past concerns. Thus,

incremental concerns on order execution will be negative surprise and dampener for the

company.

Fine-tuning - FY11E estimates to factor slower execution, but retain FY12E

estimates – We maintain HOLD rating

Retaining our stance – Punj Lloyd is traversing from ‘Unknown’ to ‘Known’, which is

comforting factor. Q2FY11 performance aptly reflects the same, where performance

remains ahead of expectation and allays some investor concerns. Since, Libya execution

slower then expectation, we have fine-tuned our revenue booking assumptions. Overall, we

downgrade our FY11E earnings by 26% (from Rs4.6/Share to Rs3.4/Share), but retain our

FY12E earnings estimates of Rs8.6/Share. Considering undemanding valuations at P/BV of

1.2X FY12E and PER of 13.6X FY12E.