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Nagarjuna Construction Company (NGCN.BO)
Buy Equity Research
Below expectations on revenue, positive surprise on inflows; Buy
What surprised us
Nagarjuna Construction announced 3QFY11 revenue of Rs13.4 bn, below
our and Bloomberg consensus estimates. Net profit for the quarter of
Rs404 mn was also below our and consensus estimates mainly on account
of increased interest expenses. However, order inflow was strong at Rs27
bn vs. Rs35 bn in 1HFY2011. As a result, its order book as of December end
stood at Rs173 bn (7% growth qoq and 17% yoy). The order inflow for the
quarter does not include any in-house BOT orders for the company.
What to do with the stock
The order inflows of Rs27 bn in 3QFY11 and Rs63 bn in the last nine
months have been strong, and the company’s guidance of Rs100 bn for
FY11E seems achievable, in our view. The current order book implies 3.6X
FY10 revenue coverage, which is strong relative to 2.5X in the past three to
four years.
Nagarjuna lowered its FY11 revenue guidance for the standalone entity by
about 10% amid the execution miss in 2QFY11 and 3QFY11. On the back of
these results, we lower our FY11E revenue. We also incorporate the higher
tax provision made in 3Q into our FY11 EPS estimates, and, consequently,
adjust our FY11E-FY13E EPS estimates by 0%-13%.
The stock currently trades at 12-month forward P/E of 10.7X (parent basis),
a 42% discount to its 5-year historical median. We retain our Buy rating
and our 12-m SOTP-based TP of Rs185 on the stock. Key risks: Higher
interest and commodity costs, slower order inflows.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Nagarjuna Construction Company (NGCN.BO)
Buy Equity Research
Below expectations on revenue, positive surprise on inflows; Buy
What surprised us
Nagarjuna Construction announced 3QFY11 revenue of Rs13.4 bn, below
our and Bloomberg consensus estimates. Net profit for the quarter of
Rs404 mn was also below our and consensus estimates mainly on account
of increased interest expenses. However, order inflow was strong at Rs27
bn vs. Rs35 bn in 1HFY2011. As a result, its order book as of December end
stood at Rs173 bn (7% growth qoq and 17% yoy). The order inflow for the
quarter does not include any in-house BOT orders for the company.
What to do with the stock
The order inflows of Rs27 bn in 3QFY11 and Rs63 bn in the last nine
months have been strong, and the company’s guidance of Rs100 bn for
FY11E seems achievable, in our view. The current order book implies 3.6X
FY10 revenue coverage, which is strong relative to 2.5X in the past three to
four years.
Nagarjuna lowered its FY11 revenue guidance for the standalone entity by
about 10% amid the execution miss in 2QFY11 and 3QFY11. On the back of
these results, we lower our FY11E revenue. We also incorporate the higher
tax provision made in 3Q into our FY11 EPS estimates, and, consequently,
adjust our FY11E-FY13E EPS estimates by 0%-13%.
The stock currently trades at 12-month forward P/E of 10.7X (parent basis),
a 42% discount to its 5-year historical median. We retain our Buy rating
and our 12-m SOTP-based TP of Rs185 on the stock. Key risks: Higher
interest and commodity costs, slower order inflows.
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