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Summary
Q3FY11 numbers were disappointing on both revenue (up 13% YoY) and earnings front (down 16%
YoY). However, order inflow for the quarter remained strong at Rs27.4 bn. Due to lower than
expected execution, we have cut our revenue estimates for FY11/FY12 by 5%/6% to
Rs53.7/64.7 bn. Also, led by lower margin assumption of 9.7% in FY11/FY12 and increase in
leverage (due to higher working capital and investment in subsidiaries), we have downgraded our
FY11/FY12 EPS by 18%/19% to Rs7.0/8.5. We maintain our BUY rating on the stock with a revised
SOTP based target price of Rs163 per share (earlier TP Rs187).
Key Highlights
Execution impacted due to weather conditions and delay in payments by clients
Standalone revenue grew by 13% YoY to Rs13.4 bn (below our estimate of Rs14.1 bn).
The execution during the quarter was impacted due to unfavourable weather conditions and delays in
payments by the clients. According to the management, the revenue loss due to this was close to
Rs2 bn for the quarter. Consolidated revenue was up 9% YoY to Rs15.9 bn.
Order inflow continues to remain strong; consolidated order book at Rs173 bn
NCC witnessed an order inflow of Rs27.4 bn in Q3FY11 (Rs62.4 bn in 9MFY11), taking the
consolidated order book position at Q3FY11-end to Rs172.7 bn. The orders inflows during the quarter
predominantly came from the buildings, irrigation, water and electrical segment. We maintain our
order inflow assumption at Rs8 bn each for the standalone entity in FY11E and FY12E.
EBITDA margins decline 30/70 bps YoY/QoQ to 9.6%; EBITDA growth at 8% YoY
Standalone EBITDA was up 8% YoY to Rs1.3 bn v/s our estimate of Rs1.4 bn. EBITDA margins
contracted by 30/70 bps YoY/QoQ to 9.6%. Lower margins were due to shortfall in revenue as
opposed to input cost pressure and the management expects to maintain EBITDA margins at 10%
going forward. We have revised downwards our EBITDA margin assumption by a marginal 20bps to
9.7% for FY11/FY12, as we feel higher input cost is bound to put some pressure on the margins.
Higher interest and tax dents bottom-line; PAT down 15% YoY to Rs404 mn
Higher debt and increase in short term interest rates led to 43% YoY (17% QoQ) increase in interest
cost. Gross debt at the end of the quarter stood at Rs23.2 bn (Rs20.6 bn at Q2FY11-end). Also, the
company has made excess tax provision of Rs40 mn for the quarter (Rs150 mn for FY11), post the
tax raids conducted by the IT department. As a result, standalone PAT was down 16% YoY to
Rs404 mn, against our estimate of Rs531 mn.
Road BOTs: COD awaited for OB Infra; UP Tollway to get operational by March 2011
While the OB Infra Annuity project is awaiting COD from the NHAI, UP Tollway is expected to commence operations in March 2011. The daily toll collection at Bangalore Elevated Tollway has remained stable at Rs1.7 mn.
Acquisition of Nelcast Power plant may make up for Sompeta disappointment
NCC has acquired 55% stake in 1320MW Nelcast Power Plant for Rs1.5 bn along with Gayatri Projects (45% partner). According to NCC, Nelcast has all the necessary approvals in place and expects the financial closure to happen by March 2011. The company has already got the approval from the coal ministry to transfer the coal linkages of its Sompeta Project to the Nelcast power plant. The total project cost is close to Rs70 bn, and NCC will execute the BOP and civil component of the plant.
Outlook and Valuation
Due to lower than expected execution during the quarter, we have cut our revenue estimates for FY11/FY12 by 5%/6% to Rs53.7/64.7 bn. However, due to lower margin assumption of 9.7% for FY11/FY12 (earlier 9.9%) and increase in leverage due to higher working capital/subsidiary investments, we have downgraded our FY11/FY12 EPS by 18%/19% to Rs7.0/8.5. We have also downgraded our P/E multiple for the standalone business from 13x earlier to 12x. We maintain our BUY rating on the stock with a revised SOTP based target price of Rs163 per share (earlier Rs187).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Summary
Q3FY11 numbers were disappointing on both revenue (up 13% YoY) and earnings front (down 16%
YoY). However, order inflow for the quarter remained strong at Rs27.4 bn. Due to lower than
expected execution, we have cut our revenue estimates for FY11/FY12 by 5%/6% to
Rs53.7/64.7 bn. Also, led by lower margin assumption of 9.7% in FY11/FY12 and increase in
leverage (due to higher working capital and investment in subsidiaries), we have downgraded our
FY11/FY12 EPS by 18%/19% to Rs7.0/8.5. We maintain our BUY rating on the stock with a revised
SOTP based target price of Rs163 per share (earlier TP Rs187).
Key Highlights
Execution impacted due to weather conditions and delay in payments by clients
Standalone revenue grew by 13% YoY to Rs13.4 bn (below our estimate of Rs14.1 bn).
The execution during the quarter was impacted due to unfavourable weather conditions and delays in
payments by the clients. According to the management, the revenue loss due to this was close to
Rs2 bn for the quarter. Consolidated revenue was up 9% YoY to Rs15.9 bn.
Order inflow continues to remain strong; consolidated order book at Rs173 bn
NCC witnessed an order inflow of Rs27.4 bn in Q3FY11 (Rs62.4 bn in 9MFY11), taking the
consolidated order book position at Q3FY11-end to Rs172.7 bn. The orders inflows during the quarter
predominantly came from the buildings, irrigation, water and electrical segment. We maintain our
order inflow assumption at Rs8 bn each for the standalone entity in FY11E and FY12E.
EBITDA margins decline 30/70 bps YoY/QoQ to 9.6%; EBITDA growth at 8% YoY
Standalone EBITDA was up 8% YoY to Rs1.3 bn v/s our estimate of Rs1.4 bn. EBITDA margins
contracted by 30/70 bps YoY/QoQ to 9.6%. Lower margins were due to shortfall in revenue as
opposed to input cost pressure and the management expects to maintain EBITDA margins at 10%
going forward. We have revised downwards our EBITDA margin assumption by a marginal 20bps to
9.7% for FY11/FY12, as we feel higher input cost is bound to put some pressure on the margins.
Higher interest and tax dents bottom-line; PAT down 15% YoY to Rs404 mn
Higher debt and increase in short term interest rates led to 43% YoY (17% QoQ) increase in interest
cost. Gross debt at the end of the quarter stood at Rs23.2 bn (Rs20.6 bn at Q2FY11-end). Also, the
company has made excess tax provision of Rs40 mn for the quarter (Rs150 mn for FY11), post the
tax raids conducted by the IT department. As a result, standalone PAT was down 16% YoY to
Rs404 mn, against our estimate of Rs531 mn.
Road BOTs: COD awaited for OB Infra; UP Tollway to get operational by March 2011
While the OB Infra Annuity project is awaiting COD from the NHAI, UP Tollway is expected to commence operations in March 2011. The daily toll collection at Bangalore Elevated Tollway has remained stable at Rs1.7 mn.
Acquisition of Nelcast Power plant may make up for Sompeta disappointment
NCC has acquired 55% stake in 1320MW Nelcast Power Plant for Rs1.5 bn along with Gayatri Projects (45% partner). According to NCC, Nelcast has all the necessary approvals in place and expects the financial closure to happen by March 2011. The company has already got the approval from the coal ministry to transfer the coal linkages of its Sompeta Project to the Nelcast power plant. The total project cost is close to Rs70 bn, and NCC will execute the BOP and civil component of the plant.
Outlook and Valuation
Due to lower than expected execution during the quarter, we have cut our revenue estimates for FY11/FY12 by 5%/6% to Rs53.7/64.7 bn. However, due to lower margin assumption of 9.7% for FY11/FY12 (earlier 9.9%) and increase in leverage due to higher working capital/subsidiary investments, we have downgraded our FY11/FY12 EPS by 18%/19% to Rs7.0/8.5. We have also downgraded our P/E multiple for the standalone business from 13x earlier to 12x. We maintain our BUY rating on the stock with a revised SOTP based target price of Rs163 per share (earlier Rs187).
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