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PUNJ LLOYD LTD
PRICE: RS.56 RECOMMENDATION: REDUCE
TARGET PRICE: RS.60 FY12E P/E: 8.5X
q Revenues of Punj Lloyd for Q1FY12 reported a growth of 40% on consolidated
basis as against same period last year. This was better than our
expectation and led by improved execution.
q Operating margins witness an improvement on sequential and yearly
basis and stayed at 7.4%.
q Company's profitability was impacted by increase in interest outgo
which resulted in net loss for Q1FY12. We had expected company to post
profits during Q1FY12.
q At current price of Rs 56, stock is trading at 8.5x P/E and 7.0x EV/EBITDA
for FY12 respectively. We tweak our estimates to factor in higher revenues
along with higher interest outgo for FY12. Higher interest rates
may continue to impact overall performance of the company. Due to
high working capital requirements of the company coupled with high
interest rates, we reduce our target valuations for the company. We arrive
at a revised price target of Rs 60 at 9x FY12 estimated earnings. We
continue to maintain our negative bias on the company hence maintain
REDUCE recommendation on the stock.
Revenue growth led by improved execution
n Revenues of Punj Lloyd for Q1FY12 reported a growth of 40% on consolidated
basis as against same period last year. This was better than our expectation and
led by improved execution.
n Current order book of company stands at Rs 239 bn diversified across pipelines
(26%), tankage (4%), infrastructure (38%), process (15%), power (12%) and
offshore(5%). Revenues in Q1FY12 were diversified across pipelines (25%), tankage
(13%), infrastructure (29%), process (15%), power (12%) and offshore
(6%). Order inflow during Q1FY12 stood at Rs 56 bn. Company expects total
order book for FY12 to improve to Rs 360 bn.
n Company has also withdrawn additional financial support to Simon Carves Ltd
due to the prevailing market conditions and financial condition of Simon Carves.
Following this, Simon Carves has been placed in Administration in accordance
with the laws of England and Wales. Subject to this, company's subsidiary PL
Engineering has entered into an asset purchase agreement through its UK subsidiary
Simon Carves Engineering for transfer of its assets. Administration can now
recover the value of the assets and Punj Lloyd is confident of recovering some
loan which it had given to Simon Carves. Company has already written off the
losses due to Simon Carves from reserves and surplus so if administration recovers
some amount, then it would be adjusted with the reserves and surplus,
thereby boosting the reserves.
n We revise our revenue estimates upwards based on improvement in execution as
well as order inflow and expect revenues to grow by 33% in FY12.
Operating margins witnessed an improvement
n Operating margins witness an improvement on sequential and yearly basis and
stayed at 7.4%.
n Operating margins during Q1FY12 were also impacted by 4 mn pound of foreign
exchange impact. But going ahead, management expect margins to remain
strong at 8%.
n Auditor notes continue to remain during Q1FY12 also regarding claims of Rs 2.43
bn on Heera redevelopment project, liquidated damages worth Rs 650 mn and
outstanding debtors of Rs 830 mn along with unbilled work in progress of Rs
1.66bn related to the said project. Also, claims worth Rs 897 mn arising due to
cost overrun due to delay in supply of free issue of material and claims of Rs 725
mn amount which is withheld by the customers also continue to remain.
n Losses in the Libya project are still not ascertained due to unrest prevailing in the
region.
n Post revising our estimates, we expect margins to be 8.1% for FY12. Possibility
of decline in margins in FY12 continues to remain due to uncertainties associated
with the outcome of various litigations.
Steep increase in interest outgo resulted in net loss for the company
during Q1FY12
n Company's profitability was impacted by increase in interest outgo which resulted
in net loss for Q1FY12. We had expected company to post profits during
Q1FY12.
n We revise our revenue estimates upwards but also correspondingly increase interest
outgo estimates. We expect company to recover from losses seen in last
three years.
n Our estimates currently don't include future write offs from Heera redevelopment
project with ONGC which is under litigation. If the decision comes against Punj
Lloyd, company would have to reverse the extra revenues worth Rs 2.43 bn
booked in last year
Valuation and recommendation
n At current price of Rs 56, stock is trading at 8.5x P/E and 7x EV/EBITDA for FY12
respectively.
n We tweak our estimates to factor in higher revenues along with higher interest
outgo for FY12. Higher interest rates may continue to impact overall performance
of the company. Due to high working capital requirements of the company
coupled with high interest rates, we reduce our target valuations for the
company.
n We arrive at a revised price target of Rs 60 at 9x FY12 estimated earnings. We
continue to maintain our negative bias on the company due to uncertainties regarding
delays or cost overruns in its projects and expectations of further write
offs related to Libya project in coming quarters.
n We maintain REDUCE rating on the stock
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PUNJ LLOYD LTD
PRICE: RS.56 RECOMMENDATION: REDUCE
TARGET PRICE: RS.60 FY12E P/E: 8.5X
q Revenues of Punj Lloyd for Q1FY12 reported a growth of 40% on consolidated
basis as against same period last year. This was better than our
expectation and led by improved execution.
q Operating margins witness an improvement on sequential and yearly
basis and stayed at 7.4%.
q Company's profitability was impacted by increase in interest outgo
which resulted in net loss for Q1FY12. We had expected company to post
profits during Q1FY12.
q At current price of Rs 56, stock is trading at 8.5x P/E and 7.0x EV/EBITDA
for FY12 respectively. We tweak our estimates to factor in higher revenues
along with higher interest outgo for FY12. Higher interest rates
may continue to impact overall performance of the company. Due to
high working capital requirements of the company coupled with high
interest rates, we reduce our target valuations for the company. We arrive
at a revised price target of Rs 60 at 9x FY12 estimated earnings. We
continue to maintain our negative bias on the company hence maintain
REDUCE recommendation on the stock.
Revenue growth led by improved execution
n Revenues of Punj Lloyd for Q1FY12 reported a growth of 40% on consolidated
basis as against same period last year. This was better than our expectation and
led by improved execution.
n Current order book of company stands at Rs 239 bn diversified across pipelines
(26%), tankage (4%), infrastructure (38%), process (15%), power (12%) and
offshore(5%). Revenues in Q1FY12 were diversified across pipelines (25%), tankage
(13%), infrastructure (29%), process (15%), power (12%) and offshore
(6%). Order inflow during Q1FY12 stood at Rs 56 bn. Company expects total
order book for FY12 to improve to Rs 360 bn.
n Company has also withdrawn additional financial support to Simon Carves Ltd
due to the prevailing market conditions and financial condition of Simon Carves.
Following this, Simon Carves has been placed in Administration in accordance
with the laws of England and Wales. Subject to this, company's subsidiary PL
Engineering has entered into an asset purchase agreement through its UK subsidiary
Simon Carves Engineering for transfer of its assets. Administration can now
recover the value of the assets and Punj Lloyd is confident of recovering some
loan which it had given to Simon Carves. Company has already written off the
losses due to Simon Carves from reserves and surplus so if administration recovers
some amount, then it would be adjusted with the reserves and surplus,
thereby boosting the reserves.
n We revise our revenue estimates upwards based on improvement in execution as
well as order inflow and expect revenues to grow by 33% in FY12.
Operating margins witnessed an improvement
n Operating margins witness an improvement on sequential and yearly basis and
stayed at 7.4%.
n Operating margins during Q1FY12 were also impacted by 4 mn pound of foreign
exchange impact. But going ahead, management expect margins to remain
strong at 8%.
n Auditor notes continue to remain during Q1FY12 also regarding claims of Rs 2.43
bn on Heera redevelopment project, liquidated damages worth Rs 650 mn and
outstanding debtors of Rs 830 mn along with unbilled work in progress of Rs
1.66bn related to the said project. Also, claims worth Rs 897 mn arising due to
cost overrun due to delay in supply of free issue of material and claims of Rs 725
mn amount which is withheld by the customers also continue to remain.
n Losses in the Libya project are still not ascertained due to unrest prevailing in the
region.
n Post revising our estimates, we expect margins to be 8.1% for FY12. Possibility
of decline in margins in FY12 continues to remain due to uncertainties associated
with the outcome of various litigations.
Steep increase in interest outgo resulted in net loss for the company
during Q1FY12
n Company's profitability was impacted by increase in interest outgo which resulted
in net loss for Q1FY12. We had expected company to post profits during
Q1FY12.
n We revise our revenue estimates upwards but also correspondingly increase interest
outgo estimates. We expect company to recover from losses seen in last
three years.
n Our estimates currently don't include future write offs from Heera redevelopment
project with ONGC which is under litigation. If the decision comes against Punj
Lloyd, company would have to reverse the extra revenues worth Rs 2.43 bn
booked in last year
Valuation and recommendation
n At current price of Rs 56, stock is trading at 8.5x P/E and 7x EV/EBITDA for FY12
respectively.
n We tweak our estimates to factor in higher revenues along with higher interest
outgo for FY12. Higher interest rates may continue to impact overall performance
of the company. Due to high working capital requirements of the company
coupled with high interest rates, we reduce our target valuations for the
company.
n We arrive at a revised price target of Rs 60 at 9x FY12 estimated earnings. We
continue to maintain our negative bias on the company due to uncertainties regarding
delays or cost overruns in its projects and expectations of further write
offs related to Libya project in coming quarters.
n We maintain REDUCE rating on the stock
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