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Sanghvi Movers
Power, Wind leading demand revival; maintain Buy
Capex indicates buoyant prospects. Sanghvi Movers (SML) has
chalked out an aggressive, `2.9-bn capex plan for FY11 (vs. earlier
`1.7bn) that indicates healthy demand prospects. Hence, we raise our
FY12e earnings by 1% from `26.2/share earlier; we also raise our
FY12e target price to `239 from `236 earlier. Maintain Buy.
SML saw revenue growth of 12.3% yoy in 2Q (4% above our
estimate), mainly owing to capacity additions. It invested ~`760m in
2QFY11 to acquire 14 cranes, boosting its fleet to 350.
Margins take a hit due to bad debt write-off. 2Q EBITDA margin
stood at 70.7%, contracting 498bps yoy, and 321bps below our
estimate. SML has written-off bad debt of up to `49.5m; adjusting
this, margins would have been at 76.3%. Also, management has
indicated that it will write-off a further bad debt of `10-20m in
2HFY11.
Earnings in line with our estimate. Net profit grew 14.1% yoy,
even though depreciation rose 21% yoy. The higher earnings growth
was due to the 130% higher ‘other income’ yoy (`61m vs. `27m
earlier) that includes `47m from the sale of some old cranes.
Change in estimate on higher planned capex. SML announced
gross capex of `2.9bn for FY11 to buy 68 cranes. We raise our FY12
estimates on this higher capex plan (vs. our earlier assumption of
`2.2bn capex).
Valuation. We raise our one-year forward target price to `239 from
`236 earlier, based on 9x FY12e earnings; retain Buy.
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