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MADHUCON PROJECTS LTD (MPL)
RECOMMENDATION: BUY
TARGET PRICE: RS.140
FY12E P/E: 9.7X
q Madhucon Projects Ltd reported 26% YoY growth in revenues for
Q3FY11 which was lower than our estimates.
q Operating margins stood at 12.73% for Q3FY11, better than our estimates.
This was due to higher proportion of power segment revenues in
the current quarter.
q Net profits grew by 6% YoY and are impacted by lower revenue growth
and higher interest outgo in comparison with last year.
q At current price of Rs 87, stock is trading at 10.2x and 9.7x P/E for FY11
and FY12 respectively. We take into account lower than expected order
inflows and thereby reduce our target P/E multiple for core business to
8x one year forward earnings. Due to delays seen in Trichy and Tuticorin
road BOT projects, we reduce our valuations from these projects. Along
with this, with delay seen in the fund raising plans of the company, we
also don't include coal mining valuations in our target valuations.
q We thus arrive at a revised price target of Rs 140 (Rs 191 earlier) on FY12
estimates. Due to decent upside from the current levels, we continue to
maintain BUY on the stock.
Revenue growth lower than our estimates
n Madhucon Projects Ltd reported 26% YoY growth in revenues for Q3FY11 which
was lower than our estimates.
n Current order book of company stands at nearly Rs 43 bn diversified across road
segment 27%, irrigation projects 20%, power projects 42%, and remaining from
building and mining segment.
n MPL has achieved financial closure of Chhapra-Hazipur Section of NH-19 in the
state of Bihar and construction work is expected to start by end of Feb, 2011.
n Phase 1 of power project by Simhapuri Energy Pvt Ltd is likely to get completed
by June, 2011 as against March, 2011 expected earlier. This was due to delays
seen in the delivery of shipment as well as extended monsoon seen in this fiscal.
For phase II, construction work has begun and targeted completion date is Sep,
2012.
n Toll collections in Madhucon Agra-Jaipur expressway and TN Expressway have
improved sequentially and these projects collected toll of Rs 10.5 lakh/day and Rs
7.7-8.2lakh/day respectively during Q3FY11. Tuticorin and Trichy projects are still
awaiting final notification for toll collections.
n Company is also L1 in Rs 11 bn worth of annuity road project and also expects
another Rs 15bn worth of road BOT project in the coming months. Along with
this, post commissioning of all BOT road projects, company expects to securitize
the receivables and invest them in the upcoming as well as existing road
projects.
n Based on strong order book, we continue to maintain our revenue estimates for
the company going forward and expect revenues to grow at a CAGR of 24%
between FY10-FY12.
Operating margins better than our estimates
n Operating margins stood at 12.73% for Q3FY11, better than our estimates. This
was due to higher proportion of power segment revenues in the current quarter.
n We maintain our estimates and expect margins to be 11% going forward.
Net profit growth impacted by lower revenue growth
n Net profits grew by 6% YoY and are impacted by lower revenue growth and
higher interest outgo in comparison with last year.
n Interest outgo was higher due to higher working capital borrowings and increase
in interest rates.
n We revise our borrowing and interest cost assumptions upwards and expect net
profits to grow at a CAGR of 27% between FY10-12.
Valuation and recommendation
n At current price of Rs 87, stock is trading at 10.2x and 9.7x P/E for FY11 and
FY12 respectively.
n We take into account lower than expected order inflows and thereby reduce our
target P/E multiple for core business to 8x one year forward earnings.
n Due to delays seen in Trichy and Tuticorin road BOT projects, we reduce our
valuations from these projects. Along with this, with delay seen in the fund raising
plans of the company, we also don't include coal mining valuations in our
target valuations.
n We thus arrive at a revised price target of Rs 140 (Rs 191 earlier) on FY12 estimates.
n Due to decent upside from the current levels, we continue to maintain BUY on
the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
MADHUCON PROJECTS LTD (MPL)
RECOMMENDATION: BUY
TARGET PRICE: RS.140
FY12E P/E: 9.7X
q Madhucon Projects Ltd reported 26% YoY growth in revenues for
Q3FY11 which was lower than our estimates.
q Operating margins stood at 12.73% for Q3FY11, better than our estimates.
This was due to higher proportion of power segment revenues in
the current quarter.
q Net profits grew by 6% YoY and are impacted by lower revenue growth
and higher interest outgo in comparison with last year.
q At current price of Rs 87, stock is trading at 10.2x and 9.7x P/E for FY11
and FY12 respectively. We take into account lower than expected order
inflows and thereby reduce our target P/E multiple for core business to
8x one year forward earnings. Due to delays seen in Trichy and Tuticorin
road BOT projects, we reduce our valuations from these projects. Along
with this, with delay seen in the fund raising plans of the company, we
also don't include coal mining valuations in our target valuations.
q We thus arrive at a revised price target of Rs 140 (Rs 191 earlier) on FY12
estimates. Due to decent upside from the current levels, we continue to
maintain BUY on the stock.
Revenue growth lower than our estimates
n Madhucon Projects Ltd reported 26% YoY growth in revenues for Q3FY11 which
was lower than our estimates.
n Current order book of company stands at nearly Rs 43 bn diversified across road
segment 27%, irrigation projects 20%, power projects 42%, and remaining from
building and mining segment.
n MPL has achieved financial closure of Chhapra-Hazipur Section of NH-19 in the
state of Bihar and construction work is expected to start by end of Feb, 2011.
n Phase 1 of power project by Simhapuri Energy Pvt Ltd is likely to get completed
by June, 2011 as against March, 2011 expected earlier. This was due to delays
seen in the delivery of shipment as well as extended monsoon seen in this fiscal.
For phase II, construction work has begun and targeted completion date is Sep,
2012.
n Toll collections in Madhucon Agra-Jaipur expressway and TN Expressway have
improved sequentially and these projects collected toll of Rs 10.5 lakh/day and Rs
7.7-8.2lakh/day respectively during Q3FY11. Tuticorin and Trichy projects are still
awaiting final notification for toll collections.
n Company is also L1 in Rs 11 bn worth of annuity road project and also expects
another Rs 15bn worth of road BOT project in the coming months. Along with
this, post commissioning of all BOT road projects, company expects to securitize
the receivables and invest them in the upcoming as well as existing road
projects.
n Based on strong order book, we continue to maintain our revenue estimates for
the company going forward and expect revenues to grow at a CAGR of 24%
between FY10-FY12.
Operating margins better than our estimates
n Operating margins stood at 12.73% for Q3FY11, better than our estimates. This
was due to higher proportion of power segment revenues in the current quarter.
n We maintain our estimates and expect margins to be 11% going forward.
Net profit growth impacted by lower revenue growth
n Net profits grew by 6% YoY and are impacted by lower revenue growth and
higher interest outgo in comparison with last year.
n Interest outgo was higher due to higher working capital borrowings and increase
in interest rates.
n We revise our borrowing and interest cost assumptions upwards and expect net
profits to grow at a CAGR of 27% between FY10-12.
Valuation and recommendation
n At current price of Rs 87, stock is trading at 10.2x and 9.7x P/E for FY11 and
FY12 respectively.
n We take into account lower than expected order inflows and thereby reduce our
target P/E multiple for core business to 8x one year forward earnings.
n Due to delays seen in Trichy and Tuticorin road BOT projects, we reduce our
valuations from these projects. Along with this, with delay seen in the fund raising
plans of the company, we also don't include coal mining valuations in our
target valuations.
n We thus arrive at a revised price target of Rs 140 (Rs 191 earlier) on FY12 estimates.
n Due to decent upside from the current levels, we continue to maintain BUY on
the stock.
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