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And the sad tale continues…
HCC’s Q4FY12 performance was dismal led by poor EBITDA margins
(7.6% vs. our expectation of 12%) and higher net interest cost (| 122.8
crore vs. our estimates of | 109.9 crore). Consequently, the company
reported a loss of | 54.2 crore vs. our estimates of | 22.2 crore. During
the quarter, HCC has also applied for CDR cell for re-alignment of debt
wherein the company is looking to apply for repayment structure of (2+8)
wherein it is seeking 2 years of moratorium and 8 years of repayment
period as well as marginal reduction in interest rates. With EPC business
remaining a drag, Lavasa sales & execution pick yet to be seen and CDR
issue is pending, we assign a SELL rating on the stock.
Poor margin show…
HCC topline came at | 1155.7 crore came higher than our estimates of |
1057.9 crore. It, however, reported net losses of | 54.2 crore vs. our
expectations of | 22.2 crore in Q4FY12 mainly due to lower margins
(7.6% vs. our expectation of 12%) and higher net interest cost (| 122.8
crore vs. our estimates of | 109.9 crore).
Debt Restructuring on the cards
The Board has approved for re-alignment of debt of HCC through CDR
process. The same has been referred to CDR cell and consequently the
proposal has been admitted. The company is looking to apply for
repayment structure of (2+8) wherein it is seeking 2 years of moratorium
and 8 years of repayment period. It is also looking for marginal reduction
in interest rates as well as additional working capital. HCC expects
decision on the same in next couple of months.
Operating profits not enough to serve debts…
The net Interest expenses at ~140% of EBITDA means that the operating
profits are not enough to service debts. With the stretched working
capital, lower operating margin and execution rate yet to pick up, HCC’s
EPC business remains a major drag and a reason for concern.
Valuation
At the CMP, the stock is trading at 1.2x FY13 P/BV. With the EPC business
remaining a major drag due to stretched working capital, sluggish
execution, and clarity on debt restructuring yet to emerge, we believe that
stock would continue to remain under pressure. We have assigned a
SELL rating to the stock with a target price of | 17/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
And the sad tale continues…
HCC’s Q4FY12 performance was dismal led by poor EBITDA margins
(7.6% vs. our expectation of 12%) and higher net interest cost (| 122.8
crore vs. our estimates of | 109.9 crore). Consequently, the company
reported a loss of | 54.2 crore vs. our estimates of | 22.2 crore. During
the quarter, HCC has also applied for CDR cell for re-alignment of debt
wherein the company is looking to apply for repayment structure of (2+8)
wherein it is seeking 2 years of moratorium and 8 years of repayment
period as well as marginal reduction in interest rates. With EPC business
remaining a drag, Lavasa sales & execution pick yet to be seen and CDR
issue is pending, we assign a SELL rating on the stock.
Poor margin show…
HCC topline came at | 1155.7 crore came higher than our estimates of |
1057.9 crore. It, however, reported net losses of | 54.2 crore vs. our
expectations of | 22.2 crore in Q4FY12 mainly due to lower margins
(7.6% vs. our expectation of 12%) and higher net interest cost (| 122.8
crore vs. our estimates of | 109.9 crore).
Debt Restructuring on the cards
The Board has approved for re-alignment of debt of HCC through CDR
process. The same has been referred to CDR cell and consequently the
proposal has been admitted. The company is looking to apply for
repayment structure of (2+8) wherein it is seeking 2 years of moratorium
and 8 years of repayment period. It is also looking for marginal reduction
in interest rates as well as additional working capital. HCC expects
decision on the same in next couple of months.
Operating profits not enough to serve debts…
The net Interest expenses at ~140% of EBITDA means that the operating
profits are not enough to service debts. With the stretched working
capital, lower operating margin and execution rate yet to pick up, HCC’s
EPC business remains a major drag and a reason for concern.
Valuation
At the CMP, the stock is trading at 1.2x FY13 P/BV. With the EPC business
remaining a major drag due to stretched working capital, sluggish
execution, and clarity on debt restructuring yet to emerge, we believe that
stock would continue to remain under pressure. We have assigned a
SELL rating to the stock with a target price of | 17/share.
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