Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY11 EBITDA in line; likely earnings recovery in 4QFY11: IVRCL's 3QFY11 revenue was Rs14b (up 20%
YoY), above our estimate of Rs13.6b (up 15% YoY). Execution picked up, resulting in the best YoY revenue growth
in the past eight quarters. EBITDA of Rs1.4b (up 21% YoY), was in line with our estimate of Rs1.36b (up 18% YoY).
EBITDA margins were 9.9% (up 13bp YoY), in line with our estimate of 10% (up 23bp YoY). Net profit was Rs423m
(down 7.7% YoY), below our estimate of Rs499m (up 8.9% YoY) driven by higher interest cost of Rs592m in 3QFY11
against Rs368m in 3QFY10 and Rs480m in 2QFY11. Increased interest costs was largely due to higher interest
rates on short term paper, which moved up to 10-10.5% from 8-8.5% in the past three months. We believe IVRCL will
post improved performance from 4QFY11. This, coupled with a likely improvement in order flows, will provide much
needed earnings visibility. We project IVRCL's earnings to grow by 11% in FY12 after a decline of 10% in FY11.
FY11, FY12 revenue estimates cut 2%, 7% respectively: We cut FY11 and FY12 revenue estimates by 2% and
7% respectively due to execution concerns. We have cut our FY11 earnings estimates by 16% and for FY12 by 26%
largely due to higher interest expenses. We assume FY11 order intake of Rs83b and Rs100b in FY12.
Order book up 11% YoY, order intake down 10% YoY: The order book as at December 2010 was Rs242b, from
Rs236b in 2QFY11 and order intake was Rs32b in 3QFY11, a decline of 10% YoY. Of the Rs242b order book, inhouse
BOT projects contributed Rs60b and Andhra irrigation projects contributed Rs30b, where execution in FY11
will be constrained. Order-book contributions were as follows: water and irrigation (Rs121b), buildings (Rs48b),
power (Rs24b), transport (Rs36b) and oil & gas (Rs12b).
Outlook and valuations: upgrade to Buy: At its current price, the stock trades at 4.5x FY12E earnings, after
adjusting for Rs31/share assigned to its subsidiaries, IVRCL Assets and its holding in Hindustan Dorr Oliver. We
believe current valuations factor in key negatives. Improvement is earnings growth in 4QFY11 will re-rate the stock.
We upgrade the stock to Buy with a revised price target of Rs115 (earlier Rs162), an upside of 59%. Our target price
is based on the SOTP method, comprising core business of Rs84/share (6x FY12E EV/EBITDA) and IVRCL Assets
(Rs22/share of IVRCL) and HDO (Rs9/share of IVRCL)
IVRCL 3QFY11 operating performance broadly in line with estimates
IVRCL's 3QFY11 revenue was Rs14b (up 20% YoY), above our estimate of Rs13.6b
(up 15% YoY). Execution picked up, resulting in best YoY growth in revenue in the
past eight quarters.
EBITDA of Rs1.4b (up 21% YoY), was in line with our estimate of Rs1.36b (up 18%
YoY). EBITDA margins were 9.9% (up 13bp YoY), in line with our estimate of 10%
(up 23bp YoY).
Net profit was Rs423m (down 7.7% YoY), below our estimate of Rs499m (up 8.9%
YoY) driven by higher interest costs of Rs592m in 3QFY11 against Rs368m in 3QFY10
and Rs480m in 2QFY11. The management said increased costs were largely due to
higher interest rates on short term paper, which moved up to 10-10.5% from 8-8.5%
in the past three months.
In 3QFY11, the management bought 100% stake in Alkor Petro Ltd and IVRCL
Building Products Ltd from its subsidiaries IVRCL Assets & Holdings Ltd for Rs200m.
We cut our FY11 earnings estimates by 16% and by 26% for FY12, largely due to
higher interest expenses. We have also cut our FY11 and FY12 revenue estimates by
2% and 7% respectively.
We believe IVRCL will post an improved performance from 4QFY11. Besides, likely
improvement in order flows will provide it much needed earnings visibility. We project
IVRCL's earnings to grow by 11% in FY12 after a decline of 10% in FY11.
At current prices, the stock trades at 4.5x FY12E earnings, after adjusting for Rs31/
share of value we have assigned to its subsidiaries, namely, IVRCL Assets and Holding
and Hindustan Dorr Oliver. We believe current valuations factor in key negatives.
Improvement in earnings growth in 4QFY11 will re-rate the stock. We upgrade the
stock to Buy with a revised price target of Rs115 (earlier Rs162).
Order book Rs242b (up 11% YoY, up 2.5% QoQ), order intake Rs32b (down
10% YoY)
The order book as at December 2010 was Rs242b, marginally above the Rs236b it
posted in 2QFY11. 3QFY11 order intake was Rs32b, down 10% YoY.
Of the Rs242b order book, in-house BOT projects contributed Rs60b and Andhra
irrigation projects Rs30b, where execution in FY11 will be constrained.
The following segments contributed to order book: water & irrigation (Rs121b), buildings
(Rs48b), power (Rs24b), transport (Rs36b) and oil & gas (Rs12b).
3QFY11 net interest costs up 61% YoY; increased advances to subsidiaries,
retention money lead to higher working capital, debt
3QFY11 interest costs were Rs592m, up 61% YoY. Interest costs rose to 4.2% of
sales against 3.1% a year earlier. The management said the increased cost was largely
due to higher bank guarantee charges (given increased project bids), higher working
capital for a large part of the quarter and increasing interest rates in systems. Interest
rates on short term paper rose to 10-10.5% from 8-8.5% over the past three months.
Net debt at the end of 3QFY11 was Rs23b, up from 14.5b at the end of FY10 and
DER was 1.1x (up from 0.8x in 4QFY10). The management expects debt to fall to
Rs19b-20b by the end of FY11.
Advances to subsidiaries were Rs4.5b in 3QFY11, up from Rs2b in 2QFY11.
Valuations and view
We cut FY11 earnings estimates by 16% and those for FY12 by 26%, largely due to
higher interest expenses. We now expect EPS of Rs7.1 in FY11 (down 10.4% YoY)
and Rs7.9 in FY12 (up 11.2% YoY). We have cut FY11 revenue expectations by 2%
and FY12 expectations by 7%.
At the current price, the stock trades at 4.5x FY12E earnings, after adjusting for Rs31
of value we have assigned to its subsidiaries, namely, IVRCL Assets and Holding and
Hindustan Dorr Oliver.
We upgrade the stock to Buy, with a revised price target of Rs115 (earlier Rs162), an
upside of 59%. Our target price is based on the SOTP method, comprising core business
of Rs84/share (6x FY12E EV/EBITDA) and IVRCL Assets (Rs22/share of IVRCL)
and HDO (Rs9/share of IVRCL).
Company description
IVRCL is a Hyderabad-based construction company,
incorporated in 1987, and promoted by Mr E Sudhir Reddy.
Its niche and key area of operations is the "water" segment,
under which it executes industrial projects, irrigation work,
desalination projects and sewerage systems. In FY10 the
company restructured the infrastructure ownership portfolio
and merged it into IVRCL Assets, an 80.5% subsidiary.
IVRCL also has 52.8% stake in Hindustan Dorr Oliver.
Key investment arguments
Reported order backlog at the end of December 2010
was Rs242b and its book-to-bill ratio of 4.4x TTM
revenues provides revenue visibility for FY11 and FY12.
The company has one of the largest BOT portfolios
with a diversified presence in roads and desalination
projects.
Key investment risks
Promoter stake is low at 9.5% (as on December 2010).
BOT projects depress initial RoE.
Andhra irrigation projects contribute ~25% (slow
moving) and in-house projects 20-22% (execution pickup
contingent on fund raising/real estate monetization
in IVRCL Assets) of the order book.
IVRCL Assets' proportionate share of equity
commitment in BOT projects is Rs13.9b.
Recent developments
The company concluded financial arrangements for
three road BOT projects awarded in FY10.
Valuation and view
We upgrade the stock to Buy, with a revised price target
of Rs115 (earlier Rs162), an upside of 59%.
Our target price is based on the SOTP method,
comprising core business of Rs84/share (6x FY12E EV/
EBITDA), IVRCL Assets (Rs22/share of IVRCL) and
HDO (Rs9/share of IVRCL).
Sector view
Increased government commitment towards
infrastructure projects is a long term positive.
Investments in BOT/real estate projects have adversely
impacted the core balance sheet. This will continue to
have a negative impact on the core business until the
SPVs in real estate and BOT start generating cash.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY11 EBITDA in line; likely earnings recovery in 4QFY11: IVRCL's 3QFY11 revenue was Rs14b (up 20%
YoY), above our estimate of Rs13.6b (up 15% YoY). Execution picked up, resulting in the best YoY revenue growth
in the past eight quarters. EBITDA of Rs1.4b (up 21% YoY), was in line with our estimate of Rs1.36b (up 18% YoY).
EBITDA margins were 9.9% (up 13bp YoY), in line with our estimate of 10% (up 23bp YoY). Net profit was Rs423m
(down 7.7% YoY), below our estimate of Rs499m (up 8.9% YoY) driven by higher interest cost of Rs592m in 3QFY11
against Rs368m in 3QFY10 and Rs480m in 2QFY11. Increased interest costs was largely due to higher interest
rates on short term paper, which moved up to 10-10.5% from 8-8.5% in the past three months. We believe IVRCL will
post improved performance from 4QFY11. This, coupled with a likely improvement in order flows, will provide much
needed earnings visibility. We project IVRCL's earnings to grow by 11% in FY12 after a decline of 10% in FY11.
FY11, FY12 revenue estimates cut 2%, 7% respectively: We cut FY11 and FY12 revenue estimates by 2% and
7% respectively due to execution concerns. We have cut our FY11 earnings estimates by 16% and for FY12 by 26%
largely due to higher interest expenses. We assume FY11 order intake of Rs83b and Rs100b in FY12.
Order book up 11% YoY, order intake down 10% YoY: The order book as at December 2010 was Rs242b, from
Rs236b in 2QFY11 and order intake was Rs32b in 3QFY11, a decline of 10% YoY. Of the Rs242b order book, inhouse
BOT projects contributed Rs60b and Andhra irrigation projects contributed Rs30b, where execution in FY11
will be constrained. Order-book contributions were as follows: water and irrigation (Rs121b), buildings (Rs48b),
power (Rs24b), transport (Rs36b) and oil & gas (Rs12b).
Outlook and valuations: upgrade to Buy: At its current price, the stock trades at 4.5x FY12E earnings, after
adjusting for Rs31/share assigned to its subsidiaries, IVRCL Assets and its holding in Hindustan Dorr Oliver. We
believe current valuations factor in key negatives. Improvement is earnings growth in 4QFY11 will re-rate the stock.
We upgrade the stock to Buy with a revised price target of Rs115 (earlier Rs162), an upside of 59%. Our target price
is based on the SOTP method, comprising core business of Rs84/share (6x FY12E EV/EBITDA) and IVRCL Assets
(Rs22/share of IVRCL) and HDO (Rs9/share of IVRCL)
IVRCL 3QFY11 operating performance broadly in line with estimates
IVRCL's 3QFY11 revenue was Rs14b (up 20% YoY), above our estimate of Rs13.6b
(up 15% YoY). Execution picked up, resulting in best YoY growth in revenue in the
past eight quarters.
EBITDA of Rs1.4b (up 21% YoY), was in line with our estimate of Rs1.36b (up 18%
YoY). EBITDA margins were 9.9% (up 13bp YoY), in line with our estimate of 10%
(up 23bp YoY).
Net profit was Rs423m (down 7.7% YoY), below our estimate of Rs499m (up 8.9%
YoY) driven by higher interest costs of Rs592m in 3QFY11 against Rs368m in 3QFY10
and Rs480m in 2QFY11. The management said increased costs were largely due to
higher interest rates on short term paper, which moved up to 10-10.5% from 8-8.5%
in the past three months.
In 3QFY11, the management bought 100% stake in Alkor Petro Ltd and IVRCL
Building Products Ltd from its subsidiaries IVRCL Assets & Holdings Ltd for Rs200m.
We cut our FY11 earnings estimates by 16% and by 26% for FY12, largely due to
higher interest expenses. We have also cut our FY11 and FY12 revenue estimates by
2% and 7% respectively.
We believe IVRCL will post an improved performance from 4QFY11. Besides, likely
improvement in order flows will provide it much needed earnings visibility. We project
IVRCL's earnings to grow by 11% in FY12 after a decline of 10% in FY11.
At current prices, the stock trades at 4.5x FY12E earnings, after adjusting for Rs31/
share of value we have assigned to its subsidiaries, namely, IVRCL Assets and Holding
and Hindustan Dorr Oliver. We believe current valuations factor in key negatives.
Improvement in earnings growth in 4QFY11 will re-rate the stock. We upgrade the
stock to Buy with a revised price target of Rs115 (earlier Rs162).
Order book Rs242b (up 11% YoY, up 2.5% QoQ), order intake Rs32b (down
10% YoY)
The order book as at December 2010 was Rs242b, marginally above the Rs236b it
posted in 2QFY11. 3QFY11 order intake was Rs32b, down 10% YoY.
Of the Rs242b order book, in-house BOT projects contributed Rs60b and Andhra
irrigation projects Rs30b, where execution in FY11 will be constrained.
The following segments contributed to order book: water & irrigation (Rs121b), buildings
(Rs48b), power (Rs24b), transport (Rs36b) and oil & gas (Rs12b).
3QFY11 net interest costs up 61% YoY; increased advances to subsidiaries,
retention money lead to higher working capital, debt
3QFY11 interest costs were Rs592m, up 61% YoY. Interest costs rose to 4.2% of
sales against 3.1% a year earlier. The management said the increased cost was largely
due to higher bank guarantee charges (given increased project bids), higher working
capital for a large part of the quarter and increasing interest rates in systems. Interest
rates on short term paper rose to 10-10.5% from 8-8.5% over the past three months.
Net debt at the end of 3QFY11 was Rs23b, up from 14.5b at the end of FY10 and
DER was 1.1x (up from 0.8x in 4QFY10). The management expects debt to fall to
Rs19b-20b by the end of FY11.
Advances to subsidiaries were Rs4.5b in 3QFY11, up from Rs2b in 2QFY11.
Valuations and view
We cut FY11 earnings estimates by 16% and those for FY12 by 26%, largely due to
higher interest expenses. We now expect EPS of Rs7.1 in FY11 (down 10.4% YoY)
and Rs7.9 in FY12 (up 11.2% YoY). We have cut FY11 revenue expectations by 2%
and FY12 expectations by 7%.
At the current price, the stock trades at 4.5x FY12E earnings, after adjusting for Rs31
of value we have assigned to its subsidiaries, namely, IVRCL Assets and Holding and
Hindustan Dorr Oliver.
We upgrade the stock to Buy, with a revised price target of Rs115 (earlier Rs162), an
upside of 59%. Our target price is based on the SOTP method, comprising core business
of Rs84/share (6x FY12E EV/EBITDA) and IVRCL Assets (Rs22/share of IVRCL)
and HDO (Rs9/share of IVRCL).
Company description
IVRCL is a Hyderabad-based construction company,
incorporated in 1987, and promoted by Mr E Sudhir Reddy.
Its niche and key area of operations is the "water" segment,
under which it executes industrial projects, irrigation work,
desalination projects and sewerage systems. In FY10 the
company restructured the infrastructure ownership portfolio
and merged it into IVRCL Assets, an 80.5% subsidiary.
IVRCL also has 52.8% stake in Hindustan Dorr Oliver.
Key investment arguments
Reported order backlog at the end of December 2010
was Rs242b and its book-to-bill ratio of 4.4x TTM
revenues provides revenue visibility for FY11 and FY12.
The company has one of the largest BOT portfolios
with a diversified presence in roads and desalination
projects.
Key investment risks
Promoter stake is low at 9.5% (as on December 2010).
BOT projects depress initial RoE.
Andhra irrigation projects contribute ~25% (slow
moving) and in-house projects 20-22% (execution pickup
contingent on fund raising/real estate monetization
in IVRCL Assets) of the order book.
IVRCL Assets' proportionate share of equity
commitment in BOT projects is Rs13.9b.
Recent developments
The company concluded financial arrangements for
three road BOT projects awarded in FY10.
Valuation and view
We upgrade the stock to Buy, with a revised price target
of Rs115 (earlier Rs162), an upside of 59%.
Our target price is based on the SOTP method,
comprising core business of Rs84/share (6x FY12E EV/
EBITDA), IVRCL Assets (Rs22/share of IVRCL) and
HDO (Rs9/share of IVRCL).
Sector view
Increased government commitment towards
infrastructure projects is a long term positive.
Investments in BOT/real estate projects have adversely
impacted the core balance sheet. This will continue to
have a negative impact on the core business until the
SPVs in real estate and BOT start generating cash.
No comments:
Post a Comment