Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Hindustan Construction Company (HCNS.BO)
Neutral Equity Research
Below expectations on net income; order inflow concerns remain
What surprised us
Hindustan Construction (HCC) reported 3QFY11 revenue of Rs10.27 bn, in
line with our and Bloomberg consensus estimates. Net income, however,
came in at Rs79 mn, significantly below our and consensus estimates.
Adjusting for forex loss, net income was Rs119 mn (still 42% below our
and 44% below consensus estimates). For the nine months ended
December 2010, revenues grew at a modest rate of 6% yoy due to slower
execution on various projects.
The company reported Rs185 bn of orders in backlog as of the period-end,
implying 18% growth yoy but a 6% decline on a sequential basis. The
company did not receive new orders in the previous three months amid a
difficult macro environment and poor order inflow for the industry in
general.
What to do with the stock
Given the subdued performance for the E&C business for the quarter,
coupled with a weak order inflow expectation and an increasing interest
rate environment, we reduce our revenue forecasts for FY11E-13E by 4%-
10% and, consequently, EPS by 10%-17%. As a result, we reduce our
SOTP-based 12-m TP to Rs57 (from Rs62) but maintain our Neutral rating.
HCC trades at 12-m fwd P/E of 26X (parent basis), which is at 14% discount
to its five-year median. However, we believe pending clarity from the
government on environmental clearance for Lavasa (65% owned by HCC)
will continue to be an overhang on the stock. Downside risks: increase in
commodity prices; rising interest rates; Upside risks: stronger order
inflows, translating to higher billings.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Hindustan Construction Company (HCNS.BO)
Neutral Equity Research
Below expectations on net income; order inflow concerns remain
What surprised us
Hindustan Construction (HCC) reported 3QFY11 revenue of Rs10.27 bn, in
line with our and Bloomberg consensus estimates. Net income, however,
came in at Rs79 mn, significantly below our and consensus estimates.
Adjusting for forex loss, net income was Rs119 mn (still 42% below our
and 44% below consensus estimates). For the nine months ended
December 2010, revenues grew at a modest rate of 6% yoy due to slower
execution on various projects.
The company reported Rs185 bn of orders in backlog as of the period-end,
implying 18% growth yoy but a 6% decline on a sequential basis. The
company did not receive new orders in the previous three months amid a
difficult macro environment and poor order inflow for the industry in
general.
What to do with the stock
Given the subdued performance for the E&C business for the quarter,
coupled with a weak order inflow expectation and an increasing interest
rate environment, we reduce our revenue forecasts for FY11E-13E by 4%-
10% and, consequently, EPS by 10%-17%. As a result, we reduce our
SOTP-based 12-m TP to Rs57 (from Rs62) but maintain our Neutral rating.
HCC trades at 12-m fwd P/E of 26X (parent basis), which is at 14% discount
to its five-year median. However, we believe pending clarity from the
government on environmental clearance for Lavasa (65% owned by HCC)
will continue to be an overhang on the stock. Downside risks: increase in
commodity prices; rising interest rates; Upside risks: stronger order
inflows, translating to higher billings.
No comments:
Post a Comment