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Construction & Infrastructure
NCC surprises with strong order inflow in a rather muted quarter
We expect a moderate order inflows for our construction universe
except NCC which bagged orders worth ~| 7000 crore (largely on
account of captive orders for Krishnapatnam project of ~| 5000 crore –
Financial closure done recently). Among others, Simplex Infrastructure
(SIL) and IVRCL bagged orders worth | 1200 crore & | 732 crore and
HCC reported two orders worth | 792 crore. The order book to bill for
our universe stands at 3.5x on TTM basis in Q3FY12 vs. 3.7x in Q3FY11.
Modest top line growth expected in Q3FY12
We expect our construction coverage to witness modest growth of
~11.8% YoY (6.1% ex- Patel Engineering (PEL)) in Q3FY12. While PEL is
expected to report ~83% YoY topline growth due to lower base, SIL &
Unity are expected to report topline growth of ~15% and ~14%
respectively. However, IVRCL, HCC & NCC are expected to report muted
growth of 3.7%, -1% & 3.5% respectively in their topline. We highlight
that while order book still remains robust across companies, the
stretching balance sheet on account of rising working capital coupled
with slowdown in the economy is restricting the top line growth.
Infrastructure universe to witness 22.5% topline growth
In terms of our infrastructure coverage universe, the topline growth is
expected at 22.5% YoY aided mainly by strong topline growth of JP
Associates (27% YoY) on account of better cement division
performance and GMR (~32% YoY) on account of consolidation of Male
Airport and improved airport division performance.
Bottom-line continue to be dampened by interest cost
The bottomline is expected to be dampened by the interest expenses
again. Interest expenses in our construction universe are expected to
rise by ~31% YoY (as percentage of revenues increased 90 bps YoY to
6.4%) in Q3FY12 eroding the bottom line sharply (~59% YoY decline).
For our infrastructure coverage universe, a sharp rise in interest (up
~34% YoY) and depreciation expenses is expected to hurt the
bottomline significantly (decline of ~39% YoY).
Company specific view
Company Remarks
HCC With the stretched balance sheet caused by sharp rise in WC, we expect
flattish top line for HCC. Additionally, the lower margin coupled with sharp
rise in interest expenses, we expect HCC's loss to expand further to |44.6
crore in Q3 FY12 from |40.5 crore in Q2 FY12.
IVRCL We expect IVRCL to report muted 4% YoY topline growth as financial
closure for captive orders is yet to be done. The bottomline too expected
to remain in pain on account of rising interest expenses (up 26% YoY).
During Q3FY12, IVRCL bagged orders worth | 732 crore.
NCC NCC is expected to report order inflow of ~| 7000 crore largely on
account of capitve power project order inflow of ~| 5000 crore). In terms
of results, we expect NCC's bottom line continue to remain muted with
meagre topline growth & sharp rise in interest expenses denting the
bottom line.
Patel Engineering Given the fact that Q3FY11 was the worst quarter for PEL, it is expected to
report relatively better financial performance in Q3 FY12. Nonetheless, we
remain cautious over muted order inflow with no growth in order book
since last couple of quarters.
Simplex Infra SIL bagged orders worth | 1200 crore in Q3FY12. With strong order book
& stability in international division revenues, we expect SIL to post ~15%
YoY topline growth. However, bottomline is expected to decline ~12% YoY
due to rise in interest expenses (up ~49% YoY) & forex loss of (| 5 crore) -
considered at EBITDA level.
Unity Infraprojects Unity is expected to report revenue growth of ~14% yoy in Q3FY12. But,
the bottomline will witness de-growth of ~4% yoy on the back of high
interest cost which is expected to rise by 63% YoY to | 31.9 crore . Order
inflow has been muted in this quarter with order inflow of ~ | 139 post Q2
FY12 results
GMR Infrastructure We anticipate GMR's net losses to come down to |13.5 crore in Q3 FY12
from |62.5 crore in Q2 FY12 on account of improved airport division
performance and realisation of gain of ~|45 crore on account of sale of
stake in Singapore subsidiary. In the power divsion, we expect dismal
performance on account of lower PLF at Vemagiri plant on account of
maintenance shutdown
GVK Power GVK Power is expected to report decline of ~4% in topline on account of
PLF at power plants due to restricted supply of gas by RIL. The PAT is also
expected to witness de-growth of 40% on account of rise in interest
expenses (up ~37% YoY to | 90.5 crore). In Q3 FY12, GVK could
consolidate MIAL financials. In that case, GVK would report topline of |790
crore & EBITDA of |257 crore due to MIAL consolidation. But, net income
would be at |34.7 crore
IRB Infrastructure We expect IRB to report a modest topline growth of ~1% YoY on acccount
of lower construction revenues post completion of Surat Dahisar &
Kolhapur IRDP projects. Bottomline pain is expected to be further
accentuated on account of higher interest expenses (up 52.5% YoY) and
consequently we anticipate a decline of ~38% YoY for PAT. Goa Karnataka
Project was terminated by NHAI as it failed to acquire land for project, IRB
has demanded penalty of | 70 crore.
JP Associates We expect JAL's cement division revenues to grow 52.1% y-o-y to | 1882
crore (volume to grow ~26% y-o-y to 4.98 MT). However, we anticipate
construction & real estate segment to have muted performance. This
coupled with higher interest & depreciation, we anticipate JAL, net income
to dent by ~39% y-o-y
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Construction & Infrastructure
NCC surprises with strong order inflow in a rather muted quarter
We expect a moderate order inflows for our construction universe
except NCC which bagged orders worth ~| 7000 crore (largely on
account of captive orders for Krishnapatnam project of ~| 5000 crore –
Financial closure done recently). Among others, Simplex Infrastructure
(SIL) and IVRCL bagged orders worth | 1200 crore & | 732 crore and
HCC reported two orders worth | 792 crore. The order book to bill for
our universe stands at 3.5x on TTM basis in Q3FY12 vs. 3.7x in Q3FY11.
Modest top line growth expected in Q3FY12
We expect our construction coverage to witness modest growth of
~11.8% YoY (6.1% ex- Patel Engineering (PEL)) in Q3FY12. While PEL is
expected to report ~83% YoY topline growth due to lower base, SIL &
Unity are expected to report topline growth of ~15% and ~14%
respectively. However, IVRCL, HCC & NCC are expected to report muted
growth of 3.7%, -1% & 3.5% respectively in their topline. We highlight
that while order book still remains robust across companies, the
stretching balance sheet on account of rising working capital coupled
with slowdown in the economy is restricting the top line growth.
Infrastructure universe to witness 22.5% topline growth
In terms of our infrastructure coverage universe, the topline growth is
expected at 22.5% YoY aided mainly by strong topline growth of JP
Associates (27% YoY) on account of better cement division
performance and GMR (~32% YoY) on account of consolidation of Male
Airport and improved airport division performance.
Bottom-line continue to be dampened by interest cost
The bottomline is expected to be dampened by the interest expenses
again. Interest expenses in our construction universe are expected to
rise by ~31% YoY (as percentage of revenues increased 90 bps YoY to
6.4%) in Q3FY12 eroding the bottom line sharply (~59% YoY decline).
For our infrastructure coverage universe, a sharp rise in interest (up
~34% YoY) and depreciation expenses is expected to hurt the
bottomline significantly (decline of ~39% YoY).
Company specific view
Company Remarks
HCC With the stretched balance sheet caused by sharp rise in WC, we expect
flattish top line for HCC. Additionally, the lower margin coupled with sharp
rise in interest expenses, we expect HCC's loss to expand further to |44.6
crore in Q3 FY12 from |40.5 crore in Q2 FY12.
IVRCL We expect IVRCL to report muted 4% YoY topline growth as financial
closure for captive orders is yet to be done. The bottomline too expected
to remain in pain on account of rising interest expenses (up 26% YoY).
During Q3FY12, IVRCL bagged orders worth | 732 crore.
NCC NCC is expected to report order inflow of ~| 7000 crore largely on
account of capitve power project order inflow of ~| 5000 crore). In terms
of results, we expect NCC's bottom line continue to remain muted with
meagre topline growth & sharp rise in interest expenses denting the
bottom line.
Patel Engineering Given the fact that Q3FY11 was the worst quarter for PEL, it is expected to
report relatively better financial performance in Q3 FY12. Nonetheless, we
remain cautious over muted order inflow with no growth in order book
since last couple of quarters.
Simplex Infra SIL bagged orders worth | 1200 crore in Q3FY12. With strong order book
& stability in international division revenues, we expect SIL to post ~15%
YoY topline growth. However, bottomline is expected to decline ~12% YoY
due to rise in interest expenses (up ~49% YoY) & forex loss of (| 5 crore) -
considered at EBITDA level.
Unity Infraprojects Unity is expected to report revenue growth of ~14% yoy in Q3FY12. But,
the bottomline will witness de-growth of ~4% yoy on the back of high
interest cost which is expected to rise by 63% YoY to | 31.9 crore . Order
inflow has been muted in this quarter with order inflow of ~ | 139 post Q2
FY12 results
GMR Infrastructure We anticipate GMR's net losses to come down to |13.5 crore in Q3 FY12
from |62.5 crore in Q2 FY12 on account of improved airport division
performance and realisation of gain of ~|45 crore on account of sale of
stake in Singapore subsidiary. In the power divsion, we expect dismal
performance on account of lower PLF at Vemagiri plant on account of
maintenance shutdown
GVK Power GVK Power is expected to report decline of ~4% in topline on account of
PLF at power plants due to restricted supply of gas by RIL. The PAT is also
expected to witness de-growth of 40% on account of rise in interest
expenses (up ~37% YoY to | 90.5 crore). In Q3 FY12, GVK could
consolidate MIAL financials. In that case, GVK would report topline of |790
crore & EBITDA of |257 crore due to MIAL consolidation. But, net income
would be at |34.7 crore
IRB Infrastructure We expect IRB to report a modest topline growth of ~1% YoY on acccount
of lower construction revenues post completion of Surat Dahisar &
Kolhapur IRDP projects. Bottomline pain is expected to be further
accentuated on account of higher interest expenses (up 52.5% YoY) and
consequently we anticipate a decline of ~38% YoY for PAT. Goa Karnataka
Project was terminated by NHAI as it failed to acquire land for project, IRB
has demanded penalty of | 70 crore.
JP Associates We expect JAL's cement division revenues to grow 52.1% y-o-y to | 1882
crore (volume to grow ~26% y-o-y to 4.98 MT). However, we anticipate
construction & real estate segment to have muted performance. This
coupled with higher interest & depreciation, we anticipate JAL, net income
to dent by ~39% y-o-y
Source: Company, ICICIdirect.com Research
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