Sanghvi Movers - Revenue growth strong, net profit above estimates; Buy :: Anand Rathi

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Sanghvi Movers
Revenue growth strong, net profit above estimates; we retain a Buy
Despite the challenging environment, Sanghvi Movers reported a strong
set of figures. Business from the wind-energy and power sectors
continues to grow, with fleet utilization up to 86%. Sanghvi has curtailed
capex for FY13 to `0.4bn, after having allocated ~ `2.25bn for capex in
FY12. We retain a Buy but revise our price target to `148 (earlier `142).

 3Q revenue up 41.7%; despite a dip in the margin, profit grew 53.1%.
Sanghvi’s 3Q revenue growth came in at 41.7% yoy (16% over our estimate).
Demand for cranes in the power and wind turbine segments continues, and
resulted in 86% utilization in 3Q for Sanghvi. The EBITDA margin was
70.2%, a 176bps yoy contraction, due to an additional `46m in bad-debt
provisioning. During 3Q, overtime revenue was 6.75% of sales (9.2% in
3QFY11); for 9MFY12, it was 6.6% (10.1% in 9MFY11). Despite the higher
bad-debt provisioning, profits rose 53.1% yoy.
 Key segments see growth despite challenging environment;
Sanghvi cuts FY13 expansion. Due to delays in power-project
execution and a slowdown in steel and cement capacity build-up, Sanghvi
curtailed capex in FY13 to `0.4bn.
 We raise FY12, FY13 estimates. We increase FY12 and FY13 earning
estimates, by 4.6% and 4.6%, respectively, on assumptions of lower capex
and higher debt repayment ahead. We increase FY12 and FY13 revenue
estimates by 3.1% and 3.6%, respectively, to factor in higher utilization
and stabilized yield.
 Valuation. The stock trades at 5.1x FY12e and 4.7x FY13e earnings. We reiterate
a Buy. Risks: lower demand, higher interest rates.