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Sanghvi Movers
2QFY11: trading at attractive valuation
Maintain a Buy. In 2QFY11, bolstered by capacity additions
Sanghvi Movers reported revenue and earnings in line with our
estimates. We retain our estimates and Buy rating.
Revenue grew by 12.3%. Revenue for the quarter rose 12.3%
yoy (just 4% over our estimate) mainly due to the capacity
additions. The company invested nearly `760m in this quarter to
acquire 13 cranes, taking its fleet to 350.
Margins take a hit. The EBITDA margin for the quarter was
70.7%, contracting 498bp yoy, and 321bp lower than our estimate.
The 2QFY11 margin contraction was exceptionally large chiefly
due to the 146% yoy increase in ‘other expenditure’.
Earnings growth in line with our estimate. Net profit grew
14.1% yoy (just 3.8% over our estimate) even though depreciation
rose 21% yoy. The higher earnings growth was due to the 130%
higher ‘other income’ yoy (`61m vs. `27m), which we believe
arose from the company selling some old cranes.
Valuation. At `181, the stock trades attractively at 8x and 6.9x
FY11e and FY12e earnings respectively. Our target price of `236
is based on 9x FY12e earnings.
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