Ramky Infrastructure -Growth momentum intact; sound balance sheet; Buy:: Anand Rathi

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Ramky Infrastructure
Growth momentum intact; sound balance sheet; Buy
In line with our estimates, Ramky’s 4Q12 revenue grew 17% yoy. The
margin, however, was slightly lower due to input cost pressures. The
order book rose 25% yoy, to `137bn. Management clarified that land
developed in Ramky Pharma City was in keeping with the concession
agreement with the state, and it has not conducted any transaction with
Jagathi Publications. We have a Buy on the stock, with a target of `353.
 Revenue in line, margin slips. Ramky’s 4QFY12 revenue grew 17%
yoy (13% growth for FY12), in line with our estimates. OPM was slightly
lower than estimated due to input costs. The FY12 margin, however, was
a good 10.4%. Ramky made provision, directly from reserves, for `660m
of prior-period taxes in regard to Sec.80 IA. Consolidated revenue/profit
for FY12 grew 22%/12%.
 Clarification on Jagan Reddy-CBI case. With regard to media reports
linking the company with Jagan Reddy’s disproportionate assets, Ramky
clarified that it has not received a summons from the CBI. Land acquired
and developed (incl. the green belt) in Ramky Pharma City was in line
with the concession agreement signed with the state. Also, it has not
conducted any transaction with Jagathi Publications, directly or indirectly.
 Concall highlights. In FY12, Ramky bagged orders of `58bn, swelling
the order book to `137bn (4.4x FY12 revenue), up 25% yoy. The order
book covers Roads (40%), Water (17%), Buildings (16%), Power (5%),
Irrigation (12%) and Industrials (7%). Equity required for the BOT
projects is `7.5bn, to be funded through internal accruals and cashflows
from operating projects. Financial closure for the two road projects,
Agra-Etawah and Hospet-Chtradurg, is likely to be complete by mid-Jun.
At 0.85x, the company standalone leverage has been stable.
 Valuation. Our sum-of-parts-based target of `353 is based on 9x FY13e
PE for the core business (`293), in line with other midcap target
multiples, and 1x Dec’11 P/BV of investment (`60). Risk: Dip in OPM.