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Near term visibility concerns
Key takeaways from the management meet
In our recent interaction with MBL, the management team reaffirmed
its confidence to achieve INR10bn in revenues for FY11. Revenue
visibility for FY12 though still remains hazy with no major order inflows
in Q3&Q4 FY11, leading to a (worrying) backlog to FY11E revenues
ratio of 1.4x. The company maintains its expectations of healthy
inflows for FY12 with orders worth INR100bn (across 40 projects)
under bidding, pre-qualification and final award stages, including the
INR40bn NHAI BOT based projects. A marked pick up in project
awarding is expected by Jun-Jul’11.
Backward integration enables better OPMs, return ratios
With a view to induce operational efficiency and cost control, MBL has
forayed into the RMC, and quarrying and mining businesses ensuring
adequate and timely supply of high quality raw materials. In addition,
an ownership of the critical equipment base and a bunch of 625
technically qualified and skilled personnel have not only aided in rapid
mobilization, serving multi-locational needs, but also imparted a
competitive edge against peers. These factors have lent a support to
deliver an enhanced business volume while maintaining a better
operating profitability as demonstrated by MBL’s five year average
OPMs, RoCE and RoNW of 12.7%, 25.3% and 28% respectively.
Focus on selective bidding, risk sharing ensures asset light model
Despite being an early entrant, MBL has been quite selective in its
bidding strategy across road BOTs. Two fold reason for the same have
been its focus on scouting and bidding for strategic and highly
lucrative projects while simultaneously adhering to an asset light
business model. In line with this philosophy, the company bagged its
second road BOT project in Apr’10 through a 51:49 JV with SREI
Infrastructure Finance in the prime iron ore mining belt of Orissa.
Toning down FY12 earnings by ~7%, maintain Buy
We revise our FY12 revenue and earnings estimates downwards by
~5% and 6.7% respectively, factoring in lower than anticipated order
inflows during FY11 (INR6.5bn vs expectations of INR9bn). We
however, remain positive on MBL’s ability to deliver ~24% revenue
CAGR over the FY11-13 period backed by anticipated INR22.1bn
worth fresh jobs in FY12 and sustenance of superior return ratios
(20%+) vis-à-vis peers (despite ~9% earnings CAGR over FY11-13E). We
are of a strong opinion that the presence of a proven integrated
business model, a professionally qualified team of employees with a
quality management at the helm should enable MBL to capture
foreseeable opportunities. Maintain ‘Buy’ with a revised Mar’12 based
price target of INR227.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Near term visibility concerns
Key takeaways from the management meet
In our recent interaction with MBL, the management team reaffirmed
its confidence to achieve INR10bn in revenues for FY11. Revenue
visibility for FY12 though still remains hazy with no major order inflows
in Q3&Q4 FY11, leading to a (worrying) backlog to FY11E revenues
ratio of 1.4x. The company maintains its expectations of healthy
inflows for FY12 with orders worth INR100bn (across 40 projects)
under bidding, pre-qualification and final award stages, including the
INR40bn NHAI BOT based projects. A marked pick up in project
awarding is expected by Jun-Jul’11.
Backward integration enables better OPMs, return ratios
With a view to induce operational efficiency and cost control, MBL has
forayed into the RMC, and quarrying and mining businesses ensuring
adequate and timely supply of high quality raw materials. In addition,
an ownership of the critical equipment base and a bunch of 625
technically qualified and skilled personnel have not only aided in rapid
mobilization, serving multi-locational needs, but also imparted a
competitive edge against peers. These factors have lent a support to
deliver an enhanced business volume while maintaining a better
operating profitability as demonstrated by MBL’s five year average
OPMs, RoCE and RoNW of 12.7%, 25.3% and 28% respectively.
Focus on selective bidding, risk sharing ensures asset light model
Despite being an early entrant, MBL has been quite selective in its
bidding strategy across road BOTs. Two fold reason for the same have
been its focus on scouting and bidding for strategic and highly
lucrative projects while simultaneously adhering to an asset light
business model. In line with this philosophy, the company bagged its
second road BOT project in Apr’10 through a 51:49 JV with SREI
Infrastructure Finance in the prime iron ore mining belt of Orissa.
Toning down FY12 earnings by ~7%, maintain Buy
We revise our FY12 revenue and earnings estimates downwards by
~5% and 6.7% respectively, factoring in lower than anticipated order
inflows during FY11 (INR6.5bn vs expectations of INR9bn). We
however, remain positive on MBL’s ability to deliver ~24% revenue
CAGR over the FY11-13 period backed by anticipated INR22.1bn
worth fresh jobs in FY12 and sustenance of superior return ratios
(20%+) vis-à-vis peers (despite ~9% earnings CAGR over FY11-13E). We
are of a strong opinion that the presence of a proven integrated
business model, a professionally qualified team of employees with a
quality management at the helm should enable MBL to capture
foreseeable opportunities. Maintain ‘Buy’ with a revised Mar’12 based
price target of INR227.
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