Buy Sanghvi Movers - Wind and Power driving growth; Anand Rathi

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Sanghvi Movers
Wind and Power driving growth; maintain Buy
Sanghvi Movers (SML) has maintained its aggressive `2.8-2.9bn
capex plan for FY11 as well as FY12e, indicating healthy demand
prospects despite lower yields. We reduce our FY11e and FY12e
earnings 12.8% and 16.1% respectively on account of lower yields,
lowered capacity utilization and higher interest rates. Hence, we cut
our target price to `201/share from `239. Maintain Buy.

 SML sees revenue de-growth of 2.3% yoy in 3Q (14.8% below our
estimate), mainly owing to breakdown of some cranes and stoppage
of work at sites where receivables were not cleared. SML invested
~`370m in 3QFY11 to acquire nine cranes, boosting its fleet to 356.
 Margin takes a hit due to rise in ‘other expenditure’. 3Q
EBITDA margin stood at 72%, contracting 349bps yoy, which is
13bps below our estimate. SML’s ‘other expenditure’ increased 34%,
to `46.6m, on lower revenue. Also, management indicated that it will
write-off further bad debt of `10-20m in 4QFY11.
 Dismal earnings – PAT below our estimates. Net profit de-grew
23.3% yoy owing to increased depreciation, which was up 18% yoy,
and de-growth in topline. Earnings were 35% below our estimates.
 Change in estimates. We cut our FY11e/FY12e yield, thereby
cutting our topline (9.9%/10.6%) and earnings (12.8%/16.1%), due
to lower yields, lowered capacity utilization and higher interest rates.
 Valuation and risks. We revise our target price downwards to `201
from `239, based on 9x FY12e earnings; maintain Buy. Key risk:
Delay in infrastructure and core projects spending