Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Construction & Infrastructure
Order inflows remain subdued, NHAI awarding to act as key
catalyst
In Q4FY11, our coverage construction companies witnessed order
inflow of ~| 3150 crore (Simplex Infra: | 1500 crore, IVRCL: | 565
crore, HCC: | 730 crore Unity: | 181 crore, PEL: | 161 crore) vs. ~|
6500 crore in Q3FY11. We believe NHAI’s awarding would act as a
key trigger, going ahead. Recently, NHAI has indicated ordering of
2,000 km in Q1FY12 and 7,000 km in FY12. Although, historically,
there have been delays and slippages in terms of awarding
contracts, procedural delays are being sorted out through Etendering,
making single RFQ for the entire award pipeline of FY12.
Execution to remain a mixed bag in Q4FY11
Our construction universe is expected to grow at 5% YoY to |
7808.6 crore. Among these, IVRCL is expected to report 14% YoY
growth on the back of improvement in execution on a bulging order
book and low base effect. We anticipate PEL’s topline will decline
30.5% YoY due to lower revenue visibility. In the infrastructure
space, IRB is expected to post healthy 71% YoY growth on the back
of healthy growth in the construction division. GVK’s revenues are
expected to decline 7% YoY on account of lower PLF in the power
division due to gas supply cut.
High interest cost to hurt bottomline growth
Given the rise in interest rate and higher debt level led by
deteriorating working capital condition, interest expenses as
percentage of revenues has increased 90 bps to 3.8% in Q4FY11. A
sharp rise in interest expenses is expected to be witnessed by HCC
(6.4%) followed by PEL (5.3%). Given the sharp rise in interest
expenses, we anticipate 22.3% decline in bottomline in our
construction coverage. HCC (65.1% YoY decline) and PEL (49% YoY
decline) are expected to see a major decline in bottomline in
Q4FY11. On the other hand, with relatively better revenue growth,
we expect IVRCL’s net profit to grow 4% YoY.
Muted Q4FY11 already priced in current prices
While earnings for the construction and infrastructure sector are
expected to remain muted in Q4FY11, the same has already been
priced in the CMP. Currently, construction stocks are quoting at 6-
11x FY12 adjusted PE and 0.8-1.4x FY12 P/BV.
Company specific view
Company Remarks
Simplex Infra Order inflows remained strong at ~| 1500 crore in Q4FY11. We expect
SIL to post ~10% YoY topline growth. However, bottomline is expected to
decline ~26% YoY due to interest expenses that have risen to ~2x. Key
monitorable: Execution rate, interest cost and rising working capital
position & debt level
Unity Infra Unity has received orders to the tune of ~| 181 crore during Q4FY11.
This implies an outstanding order book of | 3220 crore (TTM order book
to bill ratio of 1.9x). While topline is expected to slow down at ~9% YoY
due to a ban on sand, bottom line is expected to remain flattish due to
rising interest expenses and moderating topline growth
NCC Order inflow has been muted in this quarter for NCC. While execution is
expected to see a pick-up leading to revenue growth of 8.2% YoY, the
bottomline is expected to decline 8.4% YoY (after adjusting for post tax
gain of | 40 crore in the Gautami Power stake sale in Q4FY10) on account
of a sharp rise in interest expenses
IVRCL We expect IVRCL to post revenue growth of 15.2% YoY in Q4FY11 on the
back of improved execution. However, muted growth of 4% YoY is
expected on the bottomline front on account of higher interest expenses
due to a rise in debt level for working capital needs. Key monitorable:
management commentary on execution rate and status of three road
projects where financial closure is still awaited
HCC HCC's earnings continue to remain muted due to rising interest expenses.
Recently, HCC redeemed FCCB worth US$133 million, which would have
been funded from internal accruals & debt. Key monitorable: clarity of
Lavasa environmental issues and corresponding losses on the project due
to stoppage of work, working capital & debt level position, interest cost
and private equity in HCC Infra
Patel Engineering PEL is expected to take a hit of ~| 7-8 crore (PEL's share in JV) on the
bottomline on account of forfeiture of security deposit by NHAI for
withdrawal from a Dankuni Kharagpur project after emerging L-1 bidder.
Key monitorable: order inflow, execution rate, interest cost & clarity on
tax raid
JP Associates The cement volume for JAL grew 32% YoY to 4.62 million MT in Q4FY11.
We have also built in | 400/ tonne & | 200/ tonne rise in realisation &
EBIT per tonne respectively on account of multiple price hikes in cement
prices. In the construction division, we anticipate ~9% YoY decline in
revenues due to the high base effect and lower revenue visibility in the
current order book
GMR Infrastrcuture While we continue to expect an improvement in the operating
performance of the airport & power division, we expect the net loss to
expand in this quarter as there was one-off tax credit of | 106.8 crore in
Hyderabad Airport in Q3FY11
GVK Power In Q4FY11, GVK announced it has signed an agreement to buy an
additional 13.5% stake in MIAL (taking the total stake to 50.5%). To fund
this, GVK has issued LC worth US$287 million to be paid over the next
three years. We are not incorporating this deal into our financials
(consolidation of MIAL financials & incremental interest expenses with
rise in debt) as the deal is awaiting regulatory approval
IRB Infrastructure IRB is expected to post revenue growth of 71.4% YoY in Q4FY11 on
account of strong construction revenues from the ongoing Surat Dahisar,
Jaipur Deoli and other projects under construction. With accleration in
NHAI awarding expected in next few months, IRB, with strong bid
pipeline, would be a key beneficiary.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Construction & Infrastructure
Order inflows remain subdued, NHAI awarding to act as key
catalyst
In Q4FY11, our coverage construction companies witnessed order
inflow of ~| 3150 crore (Simplex Infra: | 1500 crore, IVRCL: | 565
crore, HCC: | 730 crore Unity: | 181 crore, PEL: | 161 crore) vs. ~|
6500 crore in Q3FY11. We believe NHAI’s awarding would act as a
key trigger, going ahead. Recently, NHAI has indicated ordering of
2,000 km in Q1FY12 and 7,000 km in FY12. Although, historically,
there have been delays and slippages in terms of awarding
contracts, procedural delays are being sorted out through Etendering,
making single RFQ for the entire award pipeline of FY12.
Execution to remain a mixed bag in Q4FY11
Our construction universe is expected to grow at 5% YoY to |
7808.6 crore. Among these, IVRCL is expected to report 14% YoY
growth on the back of improvement in execution on a bulging order
book and low base effect. We anticipate PEL’s topline will decline
30.5% YoY due to lower revenue visibility. In the infrastructure
space, IRB is expected to post healthy 71% YoY growth on the back
of healthy growth in the construction division. GVK’s revenues are
expected to decline 7% YoY on account of lower PLF in the power
division due to gas supply cut.
High interest cost to hurt bottomline growth
Given the rise in interest rate and higher debt level led by
deteriorating working capital condition, interest expenses as
percentage of revenues has increased 90 bps to 3.8% in Q4FY11. A
sharp rise in interest expenses is expected to be witnessed by HCC
(6.4%) followed by PEL (5.3%). Given the sharp rise in interest
expenses, we anticipate 22.3% decline in bottomline in our
construction coverage. HCC (65.1% YoY decline) and PEL (49% YoY
decline) are expected to see a major decline in bottomline in
Q4FY11. On the other hand, with relatively better revenue growth,
we expect IVRCL’s net profit to grow 4% YoY.
Muted Q4FY11 already priced in current prices
While earnings for the construction and infrastructure sector are
expected to remain muted in Q4FY11, the same has already been
priced in the CMP. Currently, construction stocks are quoting at 6-
11x FY12 adjusted PE and 0.8-1.4x FY12 P/BV.
Company specific view
Company Remarks
Simplex Infra Order inflows remained strong at ~| 1500 crore in Q4FY11. We expect
SIL to post ~10% YoY topline growth. However, bottomline is expected to
decline ~26% YoY due to interest expenses that have risen to ~2x. Key
monitorable: Execution rate, interest cost and rising working capital
position & debt level
Unity Infra Unity has received orders to the tune of ~| 181 crore during Q4FY11.
This implies an outstanding order book of | 3220 crore (TTM order book
to bill ratio of 1.9x). While topline is expected to slow down at ~9% YoY
due to a ban on sand, bottom line is expected to remain flattish due to
rising interest expenses and moderating topline growth
NCC Order inflow has been muted in this quarter for NCC. While execution is
expected to see a pick-up leading to revenue growth of 8.2% YoY, the
bottomline is expected to decline 8.4% YoY (after adjusting for post tax
gain of | 40 crore in the Gautami Power stake sale in Q4FY10) on account
of a sharp rise in interest expenses
IVRCL We expect IVRCL to post revenue growth of 15.2% YoY in Q4FY11 on the
back of improved execution. However, muted growth of 4% YoY is
expected on the bottomline front on account of higher interest expenses
due to a rise in debt level for working capital needs. Key monitorable:
management commentary on execution rate and status of three road
projects where financial closure is still awaited
HCC HCC's earnings continue to remain muted due to rising interest expenses.
Recently, HCC redeemed FCCB worth US$133 million, which would have
been funded from internal accruals & debt. Key monitorable: clarity of
Lavasa environmental issues and corresponding losses on the project due
to stoppage of work, working capital & debt level position, interest cost
and private equity in HCC Infra
Patel Engineering PEL is expected to take a hit of ~| 7-8 crore (PEL's share in JV) on the
bottomline on account of forfeiture of security deposit by NHAI for
withdrawal from a Dankuni Kharagpur project after emerging L-1 bidder.
Key monitorable: order inflow, execution rate, interest cost & clarity on
tax raid
JP Associates The cement volume for JAL grew 32% YoY to 4.62 million MT in Q4FY11.
We have also built in | 400/ tonne & | 200/ tonne rise in realisation &
EBIT per tonne respectively on account of multiple price hikes in cement
prices. In the construction division, we anticipate ~9% YoY decline in
revenues due to the high base effect and lower revenue visibility in the
current order book
GMR Infrastrcuture While we continue to expect an improvement in the operating
performance of the airport & power division, we expect the net loss to
expand in this quarter as there was one-off tax credit of | 106.8 crore in
Hyderabad Airport in Q3FY11
GVK Power In Q4FY11, GVK announced it has signed an agreement to buy an
additional 13.5% stake in MIAL (taking the total stake to 50.5%). To fund
this, GVK has issued LC worth US$287 million to be paid over the next
three years. We are not incorporating this deal into our financials
(consolidation of MIAL financials & incremental interest expenses with
rise in debt) as the deal is awaiting regulatory approval
IRB Infrastructure IRB is expected to post revenue growth of 71.4% YoY in Q4FY11 on
account of strong construction revenues from the ongoing Surat Dahisar,
Jaipur Deoli and other projects under construction. With accleration in
NHAI awarding expected in next few months, IRB, with strong bid
pipeline, would be a key beneficiary.
Source: Company, ICICIdirect.com Research
No comments:
Post a Comment