Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
E x e c u t i o n m i s s …
Hindustan Dorr Oliver (HDO) reported disappointing Q1FY12 results on all
fronts. The key reason for the disappointment was slippage in execution
(getting clearances for engineering for some projects), which led to
revenues declining in Q1FY12 by 41% to | 150 crore vs. our expectations
of | 204 crore. The above reason coupled with higher input costs resulted
in EBIDTA margins of 9.9%, a decline of 190 bps YoY. Also, a rise in
interest costs by 83% YoY due to stressed working capital requirements
dented the overall PAT for Q1FY12 by 63% to | 6 crore.
ƒ Book to bill ratio at 1.5x not comfortable amid execution delays
Order backlog at | 1550 crore as of Q1FY12 implies a book to bill ratio of
1.5x (FY11 revenues). This does not project a comfortable scenario in
terms of revenue booking given HDO is facing execution delays in some
of the projects. HDO won orders worth | 670 crore in Q1FY12, which
includes a lumpy order from Zambia worth | 380 crore. Going ahead,
given the reoccurrence of global and local macro headwinds, order
inflows are expected to get delayed. The only silver lining is the | 350
crore from UCIL where HDO is the sole bidder, the timing of the same is
not finalised yet. In such a scenario, we are further revising our revenue
estimates where we have scaled down the revenue for FY12 and FY13 by
12% and 9%, respectively. On the other hand, the cut in PAT has been
more severe as rising input costs and interest costs will lead to a double
blow to the projections. We have cut our PAT estimates by 42% and 24%
for FY12 and FY13E, respectively.
ƒ Management confident of leveraging on Davy Markham’s capabilities
Davy Markham has reported a minor loss in FY11 but is expected to turn
around in FY12E. The subsidiary has an order backlog of £33 million. It
has bid for projects in India for underground mining projects.
V a l u a t i o n
The stock has been a severe underperformer owing to the weak macro
scenario pertaining to the capex cycle. Given the earnings cut that we
have built in, the stock has seems to have priced in the same. We have
lowered the target price to | 53 and rate the stock as BUY on suppressed
valuations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
E x e c u t i o n m i s s …
Hindustan Dorr Oliver (HDO) reported disappointing Q1FY12 results on all
fronts. The key reason for the disappointment was slippage in execution
(getting clearances for engineering for some projects), which led to
revenues declining in Q1FY12 by 41% to | 150 crore vs. our expectations
of | 204 crore. The above reason coupled with higher input costs resulted
in EBIDTA margins of 9.9%, a decline of 190 bps YoY. Also, a rise in
interest costs by 83% YoY due to stressed working capital requirements
dented the overall PAT for Q1FY12 by 63% to | 6 crore.
ƒ Book to bill ratio at 1.5x not comfortable amid execution delays
Order backlog at | 1550 crore as of Q1FY12 implies a book to bill ratio of
1.5x (FY11 revenues). This does not project a comfortable scenario in
terms of revenue booking given HDO is facing execution delays in some
of the projects. HDO won orders worth | 670 crore in Q1FY12, which
includes a lumpy order from Zambia worth | 380 crore. Going ahead,
given the reoccurrence of global and local macro headwinds, order
inflows are expected to get delayed. The only silver lining is the | 350
crore from UCIL where HDO is the sole bidder, the timing of the same is
not finalised yet. In such a scenario, we are further revising our revenue
estimates where we have scaled down the revenue for FY12 and FY13 by
12% and 9%, respectively. On the other hand, the cut in PAT has been
more severe as rising input costs and interest costs will lead to a double
blow to the projections. We have cut our PAT estimates by 42% and 24%
for FY12 and FY13E, respectively.
ƒ Management confident of leveraging on Davy Markham’s capabilities
Davy Markham has reported a minor loss in FY11 but is expected to turn
around in FY12E. The subsidiary has an order backlog of £33 million. It
has bid for projects in India for underground mining projects.
V a l u a t i o n
The stock has been a severe underperformer owing to the weak macro
scenario pertaining to the capex cycle. Given the earnings cut that we
have built in, the stock has seems to have priced in the same. We have
lowered the target price to | 53 and rate the stock as BUY on suppressed
valuations.
No comments:
Post a Comment