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Pratibha registered around 25% growth in the Q3, 11 which was below
expectation mainly due to lower than anticipated revenue booking in
the Infrastructure & Construction segment. This was appended with
fall in contribution from the Pipes Manufacturing segment of the
company which is largely used for internal consumption.
The company's Revenue in the Infrastructure & Construction segment
rose about 13% from Rs 270 Crore (Q3, 10) to Rs 304 Crore (Q3, 11)
whereas the same rose by nearly 15% QoQ from Rs 264 Crore (Q2, 11).
The other segment, Pipes manufacturing fell 37% YoY to Rs 31 Crore
tough the same was higher by by 13% QoQ.
Operating performance strong, OPM's improve by around 50 bps
On the Operating front, the Total Raw materials costs as a % of Sales
increased to 71.1% (Q3, 11) as compared to 69.7% (Q3, 11) and 69.3%
sequentially. Inspite of higher input costs, lower rise in Employee cost
which moved up by 14% YoY to Rs 14 Crore and around 7% increase
YoY in Other expenses aided margins of the company. Pratibha's
Operating expenses registered around 24% increase YoY to Rs Rs 250
Crore (Q3, 11) whereas the same extended up by 13% QoQ.
No doubt the Operating margin during the quarter improved on both
Yearly and Quarterly basis to 15.4% and leading the EBITDA to
actuate by nearly 29% YoY and 17% QoQ to 39 Crore (Q3, 11).
Order backlog of around Rs 4000 Crore provides strong visibility
As of Jan 2010, Pratibha's Order Book stands at around Rs 4000 Crore
which does not include the L1 status of about Rs 700 Crore. The current
order book is almost 4X its FY 10 Revenue and escalates the future
Revenue visibility of the company. In this, Water Supply management
segment of the company constitutes around 60% of the total orders
providing further comfort w.r.t order execution. Adding to this, to develop as a full fledged
construction player the company has stepped-up its operations in other segments like
Housing projects, Commercial complexes, Pre-cast design & construction and Road
construction among others and is adding steady weight in the aforesaid verticals.
Financial Valuation and Projection
Following the muted performance during the quarter we have we pruned down our
financial estimates for FY 11 and FY 12. Owing to lower than expected growth in
Revenue over the past two quarters, we are reducing our FY 11 and FY 12 Top-line
expectation by 14% and 19 % respectively. Nevertheless, Pratibha's burgeoning Order
backlog is expected to drive the Net Sales performance which is seen growing at a CAGR
of 27% to Rs 1626 Crore (FY 12E) equated to Rs 1007 Crore (FY 10).
Decline in Revenue is expected to impact the profits of the company resulting into lower
EBITDA by 10% in FY 11 and 15% in FY 12. Despite Pratibha repaying around Rs 150 of
its debt by utilizing the proceeds from the QIP and Preferential allotment, higher Interest
costs are expected to high and eat the Bottom-line margins of the company. The Net profit
is seen lower by 15% and 16% to Rs 70 Crore and 97 Crore in FY 11 and FY 12
respectively.
Recommendation
Over the next few years, Pratibha is poised to benefit from large Projects planned by the
Central and State governments in the Infrastructure and Construction segment in India.
Moreover, the issuance of preference shares to Van Dyck a subsidiary of ChrysCapital at
high premium (Share Price - Rs 92) which now holds nearly 12% in Pratibha instills
further confidence regarding the overall business of the company.
At the Trailing market price of Rs 58, Pratibha is trading at 8.4X FY 11E and less than 6X
FY 12E, EPS of Rs 6.9 and 9.6 respectively which we fell is attractive. We value the
company at 12X its FY 11E earnings and maintain our rating with a modified Target
price of Rs 83 (Rs 98 Earlier).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pratibha registered around 25% growth in the Q3, 11 which was below
expectation mainly due to lower than anticipated revenue booking in
the Infrastructure & Construction segment. This was appended with
fall in contribution from the Pipes Manufacturing segment of the
company which is largely used for internal consumption.
The company's Revenue in the Infrastructure & Construction segment
rose about 13% from Rs 270 Crore (Q3, 10) to Rs 304 Crore (Q3, 11)
whereas the same rose by nearly 15% QoQ from Rs 264 Crore (Q2, 11).
The other segment, Pipes manufacturing fell 37% YoY to Rs 31 Crore
tough the same was higher by by 13% QoQ.
Operating performance strong, OPM's improve by around 50 bps
On the Operating front, the Total Raw materials costs as a % of Sales
increased to 71.1% (Q3, 11) as compared to 69.7% (Q3, 11) and 69.3%
sequentially. Inspite of higher input costs, lower rise in Employee cost
which moved up by 14% YoY to Rs 14 Crore and around 7% increase
YoY in Other expenses aided margins of the company. Pratibha's
Operating expenses registered around 24% increase YoY to Rs Rs 250
Crore (Q3, 11) whereas the same extended up by 13% QoQ.
No doubt the Operating margin during the quarter improved on both
Yearly and Quarterly basis to 15.4% and leading the EBITDA to
actuate by nearly 29% YoY and 17% QoQ to 39 Crore (Q3, 11).
Order backlog of around Rs 4000 Crore provides strong visibility
As of Jan 2010, Pratibha's Order Book stands at around Rs 4000 Crore
which does not include the L1 status of about Rs 700 Crore. The current
order book is almost 4X its FY 10 Revenue and escalates the future
Revenue visibility of the company. In this, Water Supply management
segment of the company constitutes around 60% of the total orders
providing further comfort w.r.t order execution. Adding to this, to develop as a full fledged
construction player the company has stepped-up its operations in other segments like
Housing projects, Commercial complexes, Pre-cast design & construction and Road
construction among others and is adding steady weight in the aforesaid verticals.
Financial Valuation and Projection
Following the muted performance during the quarter we have we pruned down our
financial estimates for FY 11 and FY 12. Owing to lower than expected growth in
Revenue over the past two quarters, we are reducing our FY 11 and FY 12 Top-line
expectation by 14% and 19 % respectively. Nevertheless, Pratibha's burgeoning Order
backlog is expected to drive the Net Sales performance which is seen growing at a CAGR
of 27% to Rs 1626 Crore (FY 12E) equated to Rs 1007 Crore (FY 10).
Decline in Revenue is expected to impact the profits of the company resulting into lower
EBITDA by 10% in FY 11 and 15% in FY 12. Despite Pratibha repaying around Rs 150 of
its debt by utilizing the proceeds from the QIP and Preferential allotment, higher Interest
costs are expected to high and eat the Bottom-line margins of the company. The Net profit
is seen lower by 15% and 16% to Rs 70 Crore and 97 Crore in FY 11 and FY 12
respectively.
Recommendation
Over the next few years, Pratibha is poised to benefit from large Projects planned by the
Central and State governments in the Infrastructure and Construction segment in India.
Moreover, the issuance of preference shares to Van Dyck a subsidiary of ChrysCapital at
high premium (Share Price - Rs 92) which now holds nearly 12% in Pratibha instills
further confidence regarding the overall business of the company.
At the Trailing market price of Rs 58, Pratibha is trading at 8.4X FY 11E and less than 6X
FY 12E, EPS of Rs 6.9 and 9.6 respectively which we fell is attractive. We value the
company at 12X its FY 11E earnings and maintain our rating with a modified Target
price of Rs 83 (Rs 98 Earlier).
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