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EARNINGS REVIEW
Punj Lloyd (PUJL.BO)
Neutral Equity Research
Above expectation on higher orders, but margin stability still uncertain
What surprised us
Punj Lloyd reported Q3FY12 profit of Rs703 mn, which included Rs840 mn of
accounting gains on write-backs from the deconsolidation of the Simon Carves
subsidiary. Adjusting for this, profit for the quarter was below our estimate,
primarily due to higher than expected contractor charges. However, revenue for
the quarter at Rs27 bn was 7%/5% above GSe and Bloomberg consensus
estimates. Order inflow at Rs42bn was 20% ahead of our estimate, resulting in
closing order book of Rs283bn being up 31% yoy – highest growth among the
stocks within our coverage. Auditor qualification has also come down by Rs5 bn
on account of the ONGC dispute and stabilization of the political situation in
Libya.
What to do with the stock
We retain our Neutral rating on the stock, as despite these positives of: (1)
Strong order inflow over the past 9M, which is 124% above the entire FY11’s
inflow; (2) reduction in auditor qualification; and (3) close to historical trough
valuations, we continue to be concerned over: (1) uncertainty on margin
stabilization; (2) our assumption that new projects will likely deliver lower
margins being they are competitive bids and given the geographical spread; and
(3) uncertainty over potential treatment of the outstanding auditor qualifications.
We adjust FY12E EPS to Rs3.96 from Rs1.59 based on Q3 results and the writeback,
and increase FY13-14E EPS by 31%-39% on higher order inflow and
stabilization of execution. We also increase our P/B-based 12m TP to Rs57 (from
Rs48 at 0.5X FY13E P/B) – now valued at 0.6X FY13E P/B – justified in our view
given our expected ROE of about 6% in FY13E. Risks: Upside: lower commodity
price and interest rate; downside: lower order inflow and project delays.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Punj Lloyd (PUJL.BO)
Neutral Equity Research
Above expectation on higher orders, but margin stability still uncertain
What surprised us
Punj Lloyd reported Q3FY12 profit of Rs703 mn, which included Rs840 mn of
accounting gains on write-backs from the deconsolidation of the Simon Carves
subsidiary. Adjusting for this, profit for the quarter was below our estimate,
primarily due to higher than expected contractor charges. However, revenue for
the quarter at Rs27 bn was 7%/5% above GSe and Bloomberg consensus
estimates. Order inflow at Rs42bn was 20% ahead of our estimate, resulting in
closing order book of Rs283bn being up 31% yoy – highest growth among the
stocks within our coverage. Auditor qualification has also come down by Rs5 bn
on account of the ONGC dispute and stabilization of the political situation in
Libya.
What to do with the stock
We retain our Neutral rating on the stock, as despite these positives of: (1)
Strong order inflow over the past 9M, which is 124% above the entire FY11’s
inflow; (2) reduction in auditor qualification; and (3) close to historical trough
valuations, we continue to be concerned over: (1) uncertainty on margin
stabilization; (2) our assumption that new projects will likely deliver lower
margins being they are competitive bids and given the geographical spread; and
(3) uncertainty over potential treatment of the outstanding auditor qualifications.
We adjust FY12E EPS to Rs3.96 from Rs1.59 based on Q3 results and the writeback,
and increase FY13-14E EPS by 31%-39% on higher order inflow and
stabilization of execution. We also increase our P/B-based 12m TP to Rs57 (from
Rs48 at 0.5X FY13E P/B) – now valued at 0.6X FY13E P/B – justified in our view
given our expected ROE of about 6% in FY13E. Risks: Upside: lower commodity
price and interest rate; downside: lower order inflow and project delays.
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