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Simplex Infra -- In-line 3Q; outlook positive
3QFY11 results
Simplex Infra reported 3QFY11 revenue
of INR11,666m, 9% higher y-y and 5%
above our estimate. EBITDA margin of
9.2% was 10bps higher y-y and 80bps
lower than our estimate. Interest expense
grew 40.2% y-y and was 12.5% ahead of
our estimate. Consequently, net profit was
flat y-y (4.5% below our estimate). At end-
3QFY11, the company had an order book
of INR139b (an increase of 31% y-y, 2.8x
our FY11 revenue estimate). L1 orders
(where Simplex is the lowest bidder and
the letter of award is awaited) totalled
INR19.4b.
Strong order inflows; balance sheet is stronger
Order inflow has been strong in 9MFY11, at about INR58b. Management
indicated that Simplex has already secured new orders worth INR9.0b
YTD. This supports our order inflow estimate of INR78.5b for FY11. The
order book position should support our FY12 revenue growth estimate
(24% y-y). Additionally, management has indicated that international
orders in Oman, Qatar, Ethiopia and Bangladesh are beginning to gain
traction, and revenue contribution from these orders is likely to improve
for the rest of the year. EBITDA margin should remain steady in the 10-
10.5% range, based on the current order book composition. The balance
sheet strengthened in 3QFY11, with working capital to sales declining to
33% from 36% in the previous quarter. The net debt-equity ratio declined
to 1.25x in 3QFy11, from 1.35x at end-2QFY11.
Valuation
We arrive at our fair-value estimate of INR481, based on a SoTP
valuation. The core construction company contributes INR472 to our fair
value, based on a 5.6x rolling 1-year forward EV/EBITDA multiple (which
is the historically traded mean for the stock ex-peak cycle). Simplex’s
26% stake in highway BOT contributes INR9 (on a DCF valuation) to our
fair value. Risks to our recommendation include: A slowdown in order
inflows, poor execution, further hardening of interest rates, and increase
in raw-material prices.
The Risk Experts
• Our starting point for this page is a recognition of the
macro factors that can have a significant impact on stockprice performance, sometimes independently of bottom-up
factors.
• With our Risk Expert page, we identify the key macro risks
that can impact stock performance.
• This analysis enhances the fundamental work laid out in
the rest of this report, giving investors yet another resource
to use in their decision-making process.
We are maintaining our revenue and EBITDA estimates for FY11-13. However, we are
increasing our interest expense by 2-8% over this period due to our higher estimate of
debt based on management guidance. As a consequence, our net profit estimates
decline 5-6% over this period.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Simplex Infra -- In-line 3Q; outlook positive
- ƒ Revenue exceeds our estimate, EBITDA in-line
- ƒOrder book strong (2.8x FY11E revenue); global orders gain traction
- ƒ Balance sheet: Working capital to sales and gearing improves
- ƒMaintain our INR481 TP (core construction INR472, road INR9)
3QFY11 results
Simplex Infra reported 3QFY11 revenue
of INR11,666m, 9% higher y-y and 5%
above our estimate. EBITDA margin of
9.2% was 10bps higher y-y and 80bps
lower than our estimate. Interest expense
grew 40.2% y-y and was 12.5% ahead of
our estimate. Consequently, net profit was
flat y-y (4.5% below our estimate). At end-
3QFY11, the company had an order book
of INR139b (an increase of 31% y-y, 2.8x
our FY11 revenue estimate). L1 orders
(where Simplex is the lowest bidder and
the letter of award is awaited) totalled
INR19.4b.
Strong order inflows; balance sheet is stronger
Order inflow has been strong in 9MFY11, at about INR58b. Management
indicated that Simplex has already secured new orders worth INR9.0b
YTD. This supports our order inflow estimate of INR78.5b for FY11. The
order book position should support our FY12 revenue growth estimate
(24% y-y). Additionally, management has indicated that international
orders in Oman, Qatar, Ethiopia and Bangladesh are beginning to gain
traction, and revenue contribution from these orders is likely to improve
for the rest of the year. EBITDA margin should remain steady in the 10-
10.5% range, based on the current order book composition. The balance
sheet strengthened in 3QFY11, with working capital to sales declining to
33% from 36% in the previous quarter. The net debt-equity ratio declined
to 1.25x in 3QFy11, from 1.35x at end-2QFY11.
Valuation
We arrive at our fair-value estimate of INR481, based on a SoTP
valuation. The core construction company contributes INR472 to our fair
value, based on a 5.6x rolling 1-year forward EV/EBITDA multiple (which
is the historically traded mean for the stock ex-peak cycle). Simplex’s
26% stake in highway BOT contributes INR9 (on a DCF valuation) to our
fair value. Risks to our recommendation include: A slowdown in order
inflows, poor execution, further hardening of interest rates, and increase
in raw-material prices.
The Risk Experts
• Our starting point for this page is a recognition of the
macro factors that can have a significant impact on stockprice performance, sometimes independently of bottom-up
factors.
• With our Risk Expert page, we identify the key macro risks
that can impact stock performance.
• This analysis enhances the fundamental work laid out in
the rest of this report, giving investors yet another resource
to use in their decision-making process.
We are maintaining our revenue and EBITDA estimates for FY11-13. However, we are
increasing our interest expense by 2-8% over this period due to our higher estimate of
debt based on management guidance. As a consequence, our net profit estimates
decline 5-6% over this period.
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