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order inflows to improve visibility
TRF reported consolidated sales growth of 48% to Rs4.3bn (PINCe Rs3.4bn)
led by better execution in project division (sales up by 132%). Margins at
operating level were at 4.4% (after adjusting forex loss). Cost overrun in
certain projects, higher material cost, unrealised foreign exchange loss and
high tax rate impacted bottom line adversely. TRF reported loss of Rs8.5mn.
Adjusted PAT was Rs27mn (PINCe Rs112mn). The company, in this quarter
managed to bag orders worth Rs2bn. It expects orders worth Rs6.5bn in
Q4FY12 in projects and product division. The automotive subsidiaries reported
subdued growth of 4% on account of slowdown in the overseas market.
Healthy order inflows expected in Q4FY12
Project division revenue increased by 132% to Rs2.5bn in Q3FY12 on account of
better execution. However, cost overrun in certain projects impacted the segmental
margins which declined sharply by 790bps to 1.7%. Order inflow in Q3FY12 was
Rs1.9bn. TRF expects orders worth Rs5.7bn mainly from NTPC and Tata Steel in
Q4FY12. We believe this is extremely positive for TRF as lack of orders in last five
consecutive quarters, reduced revenue visibility.
Subdued performance from product division
The product division report de-growth of 5% in sales to Rs694mn on account of
slowdown in demand. Change in product mix and high material cost impacted the
margins which declined sharply by 390bps to 12.2%. We believe margins to remain
under pressure in the near term.
Automotive subsidiaries witnessed an impressive sales growth of 46%. Slowdown
in demand of trailers in Middle East and Europe impacted the sales of DLT. In
9MFY12, automotive subsidiaries witnessed a revenue growth of 47% to Rs4.1bn.
Adjusting to forex loss, segmental margins improved by 70bps in Q3FY12 and
40bps in 9MFY12. With expected improvement in margins and healthy revenue
growth driven by expanded capacities coming on stream, we believe the automotive
segment would be the key growth driver for the company going forward.
VALUATIONS AND RECOMMENDATION
The current order book of the company stands at Rs12.2bn. We have increased
our sales estimates for FY12 by 8.4% and 9.2% in FY13 to factor in expected order
inflows in Q4FY12 and performance of project division in the current quarter. We
reduced our profit estimates by 35% for FY12 to factor in lower margins and increased
it by 7.8% for FY13E. We expect TRF to witness sales CAGR of 27% (FY11-14E).
The key triggers remain acceleration in order inflows and margin improvement in
automotive business. Considering the steep rise witnessed in the stock price in
last one month we believe there is limited upside. We maintain our target multiple
at 8x and downgrade the stock to ‘REDUCE’ from ‘BUY’ and revise our target price
to Rs372 (earlier Rs350).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
order inflows to improve visibility
TRF reported consolidated sales growth of 48% to Rs4.3bn (PINCe Rs3.4bn)
led by better execution in project division (sales up by 132%). Margins at
operating level were at 4.4% (after adjusting forex loss). Cost overrun in
certain projects, higher material cost, unrealised foreign exchange loss and
high tax rate impacted bottom line adversely. TRF reported loss of Rs8.5mn.
Adjusted PAT was Rs27mn (PINCe Rs112mn). The company, in this quarter
managed to bag orders worth Rs2bn. It expects orders worth Rs6.5bn in
Q4FY12 in projects and product division. The automotive subsidiaries reported
subdued growth of 4% on account of slowdown in the overseas market.
Healthy order inflows expected in Q4FY12
Project division revenue increased by 132% to Rs2.5bn in Q3FY12 on account of
better execution. However, cost overrun in certain projects impacted the segmental
margins which declined sharply by 790bps to 1.7%. Order inflow in Q3FY12 was
Rs1.9bn. TRF expects orders worth Rs5.7bn mainly from NTPC and Tata Steel in
Q4FY12. We believe this is extremely positive for TRF as lack of orders in last five
consecutive quarters, reduced revenue visibility.
Subdued performance from product division
The product division report de-growth of 5% in sales to Rs694mn on account of
slowdown in demand. Change in product mix and high material cost impacted the
margins which declined sharply by 390bps to 12.2%. We believe margins to remain
under pressure in the near term.
Automotive subsidiaries witnessed an impressive sales growth of 46%. Slowdown
in demand of trailers in Middle East and Europe impacted the sales of DLT. In
9MFY12, automotive subsidiaries witnessed a revenue growth of 47% to Rs4.1bn.
Adjusting to forex loss, segmental margins improved by 70bps in Q3FY12 and
40bps in 9MFY12. With expected improvement in margins and healthy revenue
growth driven by expanded capacities coming on stream, we believe the automotive
segment would be the key growth driver for the company going forward.
VALUATIONS AND RECOMMENDATION
The current order book of the company stands at Rs12.2bn. We have increased
our sales estimates for FY12 by 8.4% and 9.2% in FY13 to factor in expected order
inflows in Q4FY12 and performance of project division in the current quarter. We
reduced our profit estimates by 35% for FY12 to factor in lower margins and increased
it by 7.8% for FY13E. We expect TRF to witness sales CAGR of 27% (FY11-14E).
The key triggers remain acceleration in order inflows and margin improvement in
automotive business. Considering the steep rise witnessed in the stock price in
last one month we believe there is limited upside. We maintain our target multiple
at 8x and downgrade the stock to ‘REDUCE’ from ‘BUY’ and revise our target price
to Rs372 (earlier Rs350).
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