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Sanghvi Movers declared its Q3F11 results which remained much below our
estimates. Net sales reported a decline of 2.3% during Q3FY11 at Rs 805.3
mn. EBITDA and PAT declined by 6.9% and 23.2% at Rs 582.2 mn and Rs
160.5 mn respectively. EBITDA & PAT margins declined by 360 bps and 550
bps at 72.3 % and 19.9% respectively. SML has incurred a capex of Rs 1930
mn for 9MFY11 and purchased 55 cranes.
Key Highlights
Q3FY11 remains an overall dismal performance: After posting a decent
growth during H1FY11, SML’s performance during Q3FY11 remained
dismal. Net revenues declined by 2.3% at Rs 805.3 mn. Logistical
problems in transporting cranes from one site to other and keeping
receivables under control remained the major reasons for the decline in
revenues. Also few cranes were under maintanence and hence could not
be deployed on the site which resulted in a loss of revenues to the tune of
Rs 30‐Rs 40 mn. EBITDA margins took a hit due to higher operational
cost which declined by 360 bps at 72.3%. EBITDA declined by 6.9% at Rs
582.2 mn. Depreciation increased by 18.1% at Rs 235.7 mn which added
to the margin pressure. Profits after tax for Q3FY11 remained at Rs 160.5
mn with a fall of 550 bps in PAT margins.
Utilisation levels and yields on a declining trend: During the quarter the
utilization levels slipped to below 80% and the yields remained below 3%
at 2.92%.
Acquires 55 cranes at a capex of Rs 1,930 mn during 9MFY11.: SML has
acquired 55 cranes during 9MFY11 and incurred a capex of Rs 1,930 mn.
Of the total cranes purchased 34 cranes are brand new cranes and the
balance 21 cranes are the used cranes. SML will be incurring a capex of
approximately 1000 mn and purchase the balance 25 cranes during
Q4FY11.
SML likely to resume growth from Q4FY11 ownwards
Yields and utilization are likely to improve from Q4FY11. The yields are
expected to remain at 3.05% and utilization levels are likely to improve and
remain in the range of 80% ‐ 88% during Q4FY11. For FY12E the yields are
likely to remain at 3.1% and utilization levels are seen in the range of 83%‐
84%. For FY12E the company has capex plans of Rs 2800 mn.
Power & Windmill sector likely to remain major growth drivers for FY12E.
SML has bagged an order worth Rs 240 mn from Reliance power for its
power project at Sasan . Suzlon had also renewed the contract with SML for
15 months where in the rentals remained slightly on the higher side. The
share of Suzlon in the revenues from the power sector is likely to remain at
22% for FY11E and further increase to 27% for FY12E. With increased
number of power projects going on floor and more cranes getting deployed
at the upcoming power plants , power and windmill sectors are likely to
contribute 35% each to the revenues in future
Outlook & Valuation
SML is very positive about the growth prospects in the power sector and
hence have ordered high tonner cranes . SML sees its larger number of
cranes getting deployed for the power projects since June’11 with power
sector witnessing increased amount of activity.
However in view of the increased competition being faced by SML from its
competitors and SML not able to generate revenues in line with the capex
incurred by it we are of the view of that revenues , yields and utilization
need to be improved on a consistent basis in future.
The stock has witnessed sharp correction since Nov’10 in line with the
broader markets and has remained an underperformer.
At the CMP of Rs 135, the stock is trading at a P/E of 6.6x and 5.9x its FY11E
& FY12E earnings of Rs 20.6 & Rs 22.8 respectively. We maintain our
“accumulate” recommendation on the stock and downgrade our target price
to Rs 160 which is 7x its FY12E earnings of Rs 22.8.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sanghvi Movers declared its Q3F11 results which remained much below our
estimates. Net sales reported a decline of 2.3% during Q3FY11 at Rs 805.3
mn. EBITDA and PAT declined by 6.9% and 23.2% at Rs 582.2 mn and Rs
160.5 mn respectively. EBITDA & PAT margins declined by 360 bps and 550
bps at 72.3 % and 19.9% respectively. SML has incurred a capex of Rs 1930
mn for 9MFY11 and purchased 55 cranes.
Key Highlights
Q3FY11 remains an overall dismal performance: After posting a decent
growth during H1FY11, SML’s performance during Q3FY11 remained
dismal. Net revenues declined by 2.3% at Rs 805.3 mn. Logistical
problems in transporting cranes from one site to other and keeping
receivables under control remained the major reasons for the decline in
revenues. Also few cranes were under maintanence and hence could not
be deployed on the site which resulted in a loss of revenues to the tune of
Rs 30‐Rs 40 mn. EBITDA margins took a hit due to higher operational
cost which declined by 360 bps at 72.3%. EBITDA declined by 6.9% at Rs
582.2 mn. Depreciation increased by 18.1% at Rs 235.7 mn which added
to the margin pressure. Profits after tax for Q3FY11 remained at Rs 160.5
mn with a fall of 550 bps in PAT margins.
Utilisation levels and yields on a declining trend: During the quarter the
utilization levels slipped to below 80% and the yields remained below 3%
at 2.92%.
Acquires 55 cranes at a capex of Rs 1,930 mn during 9MFY11.: SML has
acquired 55 cranes during 9MFY11 and incurred a capex of Rs 1,930 mn.
Of the total cranes purchased 34 cranes are brand new cranes and the
balance 21 cranes are the used cranes. SML will be incurring a capex of
approximately 1000 mn and purchase the balance 25 cranes during
Q4FY11.
SML likely to resume growth from Q4FY11 ownwards
Yields and utilization are likely to improve from Q4FY11. The yields are
expected to remain at 3.05% and utilization levels are likely to improve and
remain in the range of 80% ‐ 88% during Q4FY11. For FY12E the yields are
likely to remain at 3.1% and utilization levels are seen in the range of 83%‐
84%. For FY12E the company has capex plans of Rs 2800 mn.
Power & Windmill sector likely to remain major growth drivers for FY12E.
SML has bagged an order worth Rs 240 mn from Reliance power for its
power project at Sasan . Suzlon had also renewed the contract with SML for
15 months where in the rentals remained slightly on the higher side. The
share of Suzlon in the revenues from the power sector is likely to remain at
22% for FY11E and further increase to 27% for FY12E. With increased
number of power projects going on floor and more cranes getting deployed
at the upcoming power plants , power and windmill sectors are likely to
contribute 35% each to the revenues in future
Outlook & Valuation
SML is very positive about the growth prospects in the power sector and
hence have ordered high tonner cranes . SML sees its larger number of
cranes getting deployed for the power projects since June’11 with power
sector witnessing increased amount of activity.
However in view of the increased competition being faced by SML from its
competitors and SML not able to generate revenues in line with the capex
incurred by it we are of the view of that revenues , yields and utilization
need to be improved on a consistent basis in future.
The stock has witnessed sharp correction since Nov’10 in line with the
broader markets and has remained an underperformer.
At the CMP of Rs 135, the stock is trading at a P/E of 6.6x and 5.9x its FY11E
& FY12E earnings of Rs 20.6 & Rs 22.8 respectively. We maintain our
“accumulate” recommendation on the stock and downgrade our target price
to Rs 160 which is 7x its FY12E earnings of Rs 22.8.
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