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Results below estimates
Simplex Infrastructures’ (SINF) Q3FY11 standalone revenues and PAT were
below our estimates. Revenue, at INR 11.7 bn, grew 9% Y-o-Y and 11% Q-o-Q.
The company attributed this to sluggish order intake and lack of pick up in
execution in overseas territories. EBITDA margin, at 9.2%, was more or less flat
Y-o-Y but declined 80bps Q-o-Q. In line with peers in the industry, hardening
interest rates led to the company’s interest charges catapulting 38% Y-o-Y and
23% Q-o-Q. PAT, at INR 232 mn, was flat Y-o-Y and down 14% Q-o-Q. PAT
margin, at 2.0%, declined 20bps Y-o-Y and 60bps Q-o-Q.
Growth momentum in order intake continues
Revival in order intake continued for SINF with fresh orders during the quarter at
~INR 21 bn (INR 17.5 bn in Q2FY11). Order book at Q3FY11 end was INR 139
bn against INR 129 bn at Q2FY11 end and INR 115 bn at FY10 end. In addition,
SINF has won INR 9 bn of fresh orders during January 2011 and is L1 in INR
19.4 bn worth of orders.
The company is witnessing significant traction in power, buildings, urban infra,
and industrial segments. While overseas order intake was muted during the
quarter, SINF expects revival in order intake in foreign markets going ahead.
Outlook and valuations: Revenue visibility a positive; maintain ‘HOLD’
We have calibrated our estimates keeping in mind 9mFY11 performance. Due to
weak performance during the year, we have revised down FY11 revenue and PAT
estimates 9% and 21%, respectively. At CMP of INR 333, for revised fully diluted
standalone EPS estimate of INR 23.0 and INR 27.9, respectively, SINF is trading
at P/E of 14.5x and 11.9x FY11E and FY12E, respectively.
We believe the company’s long-term outlook is promising, it being the most
diversified contractor, both segment-wise and geographically. Its order inflows
have been strong and it stands to benefit handsomely from the upturn in the
private sector capex which is likely to boost margins and improve working
capital. However, revenue pick up has been disappointing and increasing interest
costs have hurt profitability. We expect future stock performance to track
execution growth. We maintain ‘HOLD’ recommendation on the stock and rate it
‘Sector Performer’ on relative return basis.
Other highlights
• Order book break up: Urban infra (14%), power (24%), building (20%), industrial
(16%), railways (2%), bridges (9%), roads (8%), marine (3%), and piling (4%).
• Order intake break up for the quarter: Railways (12%), roads (23%), power
(22%), buildings (10%), bridges (6%), urban infra (17%), industrial (5%), marine
(2%), and piling (3%).
• Revenue break up: Urban infra (14%), power (33%), building (11%), industrial
(14%), railways (3%), bridges (11%), roads (2%), marine (3%), and piling (11%).
• Overseas segment: Overseas business contributed 12% to revenues during the
quarter; its share in the order book declined to 15% (18% in Q2FY11). Overseas
segment contributed INR 7.7 bn to order intake during 9mFY11. SINF indicated that
it expects overseas order inflows to pick up going ahead.
• Financial closure achieved on road BOT project: SINF has achieved financial
closure of its road BOT project. Its share of equity commitment for the project is INR
800 mn over the next couple of years of which it has already invested INR 80 mn.
The company expects toll collection on the project to begin from March 2011.
• Capex: Capex during the quarter stood at INR 720 mn (INR 750 mn in H1FY11).
The company expects capex for FY11E to be ~ INR 1.75 bn and INR 2 bn for FY12E.
Company Description
SINF is a fast growing infrastructure construction company present across all verticals
within the infrastructure space. A piling contractor by origin, SINF has ramped up its
capabilities and currently executes projects in the power, industrial structures, buildings,
roads, railways, marine, and urban infrastructure segments. The company emphasises
on diversification and is thus focused on building a versatile business model, in terms of
segmental mix as well as geographical contribution. SINF has successfully entered the
Middle Eastern markets and the overseas operations have now achieved a significant
scale.
Investment Theme
SINF is one of the few pure contracting plays available in the construction industry. Its
strong technical and execution capabilities are likely to lead to robust growth in revenues
as well as margins, going forward. Increasing share of EPC projects in the order book,
accompanied with the advantages of building a business model, which leans overseas, is
likely to result in long-term benefits for the company. Continued preference for pure
contracting space with a focus on short duration projects, along with risk mitigation by
way of geographical and business mix diversification, provides the company with a great
platform to achieve solid growth, going forward.
Key Risks
Any delays in project execution in the domestic or overseas markets may lead to slower
than-anticipated revenue growth, impacting margins and liquidity negatively. With a high
share of the private sector in the order book, a slowdown in corporate capex will impact
SINF’s order intake and revenue growth negatively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Results below estimates
Simplex Infrastructures’ (SINF) Q3FY11 standalone revenues and PAT were
below our estimates. Revenue, at INR 11.7 bn, grew 9% Y-o-Y and 11% Q-o-Q.
The company attributed this to sluggish order intake and lack of pick up in
execution in overseas territories. EBITDA margin, at 9.2%, was more or less flat
Y-o-Y but declined 80bps Q-o-Q. In line with peers in the industry, hardening
interest rates led to the company’s interest charges catapulting 38% Y-o-Y and
23% Q-o-Q. PAT, at INR 232 mn, was flat Y-o-Y and down 14% Q-o-Q. PAT
margin, at 2.0%, declined 20bps Y-o-Y and 60bps Q-o-Q.
Growth momentum in order intake continues
Revival in order intake continued for SINF with fresh orders during the quarter at
~INR 21 bn (INR 17.5 bn in Q2FY11). Order book at Q3FY11 end was INR 139
bn against INR 129 bn at Q2FY11 end and INR 115 bn at FY10 end. In addition,
SINF has won INR 9 bn of fresh orders during January 2011 and is L1 in INR
19.4 bn worth of orders.
The company is witnessing significant traction in power, buildings, urban infra,
and industrial segments. While overseas order intake was muted during the
quarter, SINF expects revival in order intake in foreign markets going ahead.
Outlook and valuations: Revenue visibility a positive; maintain ‘HOLD’
We have calibrated our estimates keeping in mind 9mFY11 performance. Due to
weak performance during the year, we have revised down FY11 revenue and PAT
estimates 9% and 21%, respectively. At CMP of INR 333, for revised fully diluted
standalone EPS estimate of INR 23.0 and INR 27.9, respectively, SINF is trading
at P/E of 14.5x and 11.9x FY11E and FY12E, respectively.
We believe the company’s long-term outlook is promising, it being the most
diversified contractor, both segment-wise and geographically. Its order inflows
have been strong and it stands to benefit handsomely from the upturn in the
private sector capex which is likely to boost margins and improve working
capital. However, revenue pick up has been disappointing and increasing interest
costs have hurt profitability. We expect future stock performance to track
execution growth. We maintain ‘HOLD’ recommendation on the stock and rate it
‘Sector Performer’ on relative return basis.
Other highlights
• Order book break up: Urban infra (14%), power (24%), building (20%), industrial
(16%), railways (2%), bridges (9%), roads (8%), marine (3%), and piling (4%).
• Order intake break up for the quarter: Railways (12%), roads (23%), power
(22%), buildings (10%), bridges (6%), urban infra (17%), industrial (5%), marine
(2%), and piling (3%).
• Revenue break up: Urban infra (14%), power (33%), building (11%), industrial
(14%), railways (3%), bridges (11%), roads (2%), marine (3%), and piling (11%).
• Overseas segment: Overseas business contributed 12% to revenues during the
quarter; its share in the order book declined to 15% (18% in Q2FY11). Overseas
segment contributed INR 7.7 bn to order intake during 9mFY11. SINF indicated that
it expects overseas order inflows to pick up going ahead.
• Financial closure achieved on road BOT project: SINF has achieved financial
closure of its road BOT project. Its share of equity commitment for the project is INR
800 mn over the next couple of years of which it has already invested INR 80 mn.
The company expects toll collection on the project to begin from March 2011.
• Capex: Capex during the quarter stood at INR 720 mn (INR 750 mn in H1FY11).
The company expects capex for FY11E to be ~ INR 1.75 bn and INR 2 bn for FY12E.
Company Description
SINF is a fast growing infrastructure construction company present across all verticals
within the infrastructure space. A piling contractor by origin, SINF has ramped up its
capabilities and currently executes projects in the power, industrial structures, buildings,
roads, railways, marine, and urban infrastructure segments. The company emphasises
on diversification and is thus focused on building a versatile business model, in terms of
segmental mix as well as geographical contribution. SINF has successfully entered the
Middle Eastern markets and the overseas operations have now achieved a significant
scale.
Investment Theme
SINF is one of the few pure contracting plays available in the construction industry. Its
strong technical and execution capabilities are likely to lead to robust growth in revenues
as well as margins, going forward. Increasing share of EPC projects in the order book,
accompanied with the advantages of building a business model, which leans overseas, is
likely to result in long-term benefits for the company. Continued preference for pure
contracting space with a focus on short duration projects, along with risk mitigation by
way of geographical and business mix diversification, provides the company with a great
platform to achieve solid growth, going forward.
Key Risks
Any delays in project execution in the domestic or overseas markets may lead to slower
than-anticipated revenue growth, impacting margins and liquidity negatively. With a high
share of the private sector in the order book, a slowdown in corporate capex will impact
SINF’s order intake and revenue growth negatively.
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