Key takeaways
Revenue growth strong, margins dip. Supreme Infrastructure’s revenue
grew 28.7% yoy (19% qoq), beating our estimate. Its reported EBITDA
margin, however, declined 175bps yoy to 12.7% (down 460bps qoq), lower
than we estimated. The company has made a one-time `110m provision for a
defunct liability, which led to the margin decline; adjusting for this, the margin
stood at 14.3%. Over FY14-15 management expects to maintain the margin
at 15-17%. As a result of the strong revenue growth and lower EBITDA
margin, adjusted PAT grew 50.4%, and came higher than we expected. Debt
has increased, taking net gearing to 1.8x.
Order book strong. The order book (incl. L1 projects of `11.2bn) of
`60.4bn (3x TTM revenue) is dominated by roads & bridges (40%) and
buildings (49%). Order inflows during FY13 stood at `31.3bn. The company
surpassed its full-year target order inflow of ~`25bn.
BOT projects update. For 10 BOT road projects, the company has an
equity commitment over FY12-15 of ~`8.1bn. Of this, it has infused `4.35bn
through investment, advances and debt at the hold-co level; ~`3.1bn is to be
infused by 3i India Infra Fund (of which `2bn has already been received), the
rest will be invested over FY12-15. The last tranche from 3i has not yet been
received and is awaiting certain NHAI clearances. BOT projects comprise
25% of the order book and is reducing. The Manor-Wada road project has
been operational since Jan’13. The company expects to raise `2bn-2.5bn by
securitizing the cash flows of this project and to repay some of its debt.
Our take. The company continues to demonstrate consistent and strong
revenue growth, with a stable operating performance. We expect it to post
~15%/19% revenue/PAT CAGRs in the next two years. We retain a Buy,
with a target of `360. Our sum-of-parts-based target of `360 is based on 4x
FY14e PE of the construction business (`304, a 50% discount to midcap
target multiples) and 1x Mar’12 P/BV (`56). Risk: Rise in interest rates.
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Revenue growth strong, margins dip. Supreme Infrastructure’s revenue
grew 28.7% yoy (19% qoq), beating our estimate. Its reported EBITDA
margin, however, declined 175bps yoy to 12.7% (down 460bps qoq), lower
than we estimated. The company has made a one-time `110m provision for a
defunct liability, which led to the margin decline; adjusting for this, the margin
stood at 14.3%. Over FY14-15 management expects to maintain the margin
at 15-17%. As a result of the strong revenue growth and lower EBITDA
margin, adjusted PAT grew 50.4%, and came higher than we expected. Debt
has increased, taking net gearing to 1.8x.
Order book strong. The order book (incl. L1 projects of `11.2bn) of
`60.4bn (3x TTM revenue) is dominated by roads & bridges (40%) and
buildings (49%). Order inflows during FY13 stood at `31.3bn. The company
surpassed its full-year target order inflow of ~`25bn.
BOT projects update. For 10 BOT road projects, the company has an
equity commitment over FY12-15 of ~`8.1bn. Of this, it has infused `4.35bn
through investment, advances and debt at the hold-co level; ~`3.1bn is to be
infused by 3i India Infra Fund (of which `2bn has already been received), the
rest will be invested over FY12-15. The last tranche from 3i has not yet been
received and is awaiting certain NHAI clearances. BOT projects comprise
25% of the order book and is reducing. The Manor-Wada road project has
been operational since Jan’13. The company expects to raise `2bn-2.5bn by
securitizing the cash flows of this project and to repay some of its debt.
Our take. The company continues to demonstrate consistent and strong
revenue growth, with a stable operating performance. We expect it to post
~15%/19% revenue/PAT CAGRs in the next two years. We retain a Buy,
with a target of `360. Our sum-of-parts-based target of `360 is based on 4x
FY14e PE of the construction business (`304, a 50% discount to midcap
target multiples) and 1x Mar’12 P/BV (`56). Risk: Rise in interest rates.
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