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UBS Investment Research
Punj Lloyd
R eports losses again
Event: Losses of Rs123m led by high interest costs and taxes
Punj reported Q1 (consolidated) net losses of Rs123m, versus UBS-e and consensus
expectations of a profit. Q1 revenues at Rs22.6bn were 5% below UBS-e of
Rs22.2bn (consensus Rs19.7bn) and EBITDA margins at 8% (+26bps y/y) were
below UBS-e of 8.9% (consensus 7.7%). Margins were impacted due to a significant
rise in raw material costs. Operating profit was Rs1.8bn versus our expectation of
Rs1.95bn. There is a Rs84.4m adjustment pertaining to prior-period items- the exact
nature of its impact on results we expect to get in the conference call.
Impact: Rs1.34bn of assets to be recovered from Simon Carves UK
Punj had withdrawn financial support to its step-down subsidiary Simon Carves
UK. The company is now under administration and the management is hopeful of
recovering the assets through the arbitration process. Punj currently has an order
backlog of ~Rs239bn and order inflow in Q1FY12 was Rs5.6bn.
Infra/Pipeline/Process/Power comprise 38%/26%/15%/12% of the order backlog.
47% of the order book is in South Asia, 23% in Asia Pacific and 16% in Africa.
Action: Conference call on 16th August at 3pm
The results have been impacted by taxes of Rs216m on a PBT of Rs89m due to the
booking of profits and losses in different subsidiaries in our view. We expect to get
details on the same and also on working capital, debt levels and the status of
various arbitration proceedings in the conference call.
Valuation: Maintain Sell
We maintain our Sell rating. We have a DCF-based price target of Rs57.
Punj Lloyd
Punj Lloyd is the second largest company in the E&C space in India,
specialising in laying pipelines, building oil & gas storage tanks, terminals and
process facilities. It has an extensive geographical presence, having executed
projects in the Middle East, Asia Pacific, and the Caspian region. In 2006, Punj
acquired Singapore-based Sembawang E&C and its UK-based subsidiary,
Simon Carves. This acquisition enables the company to acquire pre-qualification
in new verticals of infrastructure such as airports, jetties, MRT/LRT, tunnelling
and EPC capabilities in the petrochemical domain.
Statement of Risk
The company faces numerous risks which include: 1) execution risks – with
c80% of operations being executed overseas, the company is subject to the
political and regulatory environment in those countries; 2) slowdown in the
integration with Sembawang would affect the company’s long-term plans; 3)
slowdown in the oil and gas sector capex plans could lead to less demand for
E&C activities and 4) increasing competition.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Punj Lloyd
R eports losses again
Event: Losses of Rs123m led by high interest costs and taxes
Punj reported Q1 (consolidated) net losses of Rs123m, versus UBS-e and consensus
expectations of a profit. Q1 revenues at Rs22.6bn were 5% below UBS-e of
Rs22.2bn (consensus Rs19.7bn) and EBITDA margins at 8% (+26bps y/y) were
below UBS-e of 8.9% (consensus 7.7%). Margins were impacted due to a significant
rise in raw material costs. Operating profit was Rs1.8bn versus our expectation of
Rs1.95bn. There is a Rs84.4m adjustment pertaining to prior-period items- the exact
nature of its impact on results we expect to get in the conference call.
Impact: Rs1.34bn of assets to be recovered from Simon Carves UK
Punj had withdrawn financial support to its step-down subsidiary Simon Carves
UK. The company is now under administration and the management is hopeful of
recovering the assets through the arbitration process. Punj currently has an order
backlog of ~Rs239bn and order inflow in Q1FY12 was Rs5.6bn.
Infra/Pipeline/Process/Power comprise 38%/26%/15%/12% of the order backlog.
47% of the order book is in South Asia, 23% in Asia Pacific and 16% in Africa.
Action: Conference call on 16th August at 3pm
The results have been impacted by taxes of Rs216m on a PBT of Rs89m due to the
booking of profits and losses in different subsidiaries in our view. We expect to get
details on the same and also on working capital, debt levels and the status of
various arbitration proceedings in the conference call.
Valuation: Maintain Sell
We maintain our Sell rating. We have a DCF-based price target of Rs57.
Punj Lloyd
Punj Lloyd is the second largest company in the E&C space in India,
specialising in laying pipelines, building oil & gas storage tanks, terminals and
process facilities. It has an extensive geographical presence, having executed
projects in the Middle East, Asia Pacific, and the Caspian region. In 2006, Punj
acquired Singapore-based Sembawang E&C and its UK-based subsidiary,
Simon Carves. This acquisition enables the company to acquire pre-qualification
in new verticals of infrastructure such as airports, jetties, MRT/LRT, tunnelling
and EPC capabilities in the petrochemical domain.
Statement of Risk
The company faces numerous risks which include: 1) execution risks – with
c80% of operations being executed overseas, the company is subject to the
political and regulatory environment in those countries; 2) slowdown in the
integration with Sembawang would affect the company’s long-term plans; 3)
slowdown in the oil and gas sector capex plans could lead to less demand for
E&C activities and 4) increasing competition.
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