Pratibha Industries
Stable performance; Buy
Key takeaways
Restrained revenue performance. For 3QFY14, Pratibha Industries’
revenue, we expect, would have grown 7.8% yoy (up 6% qoq) following a
pickup in revenue growth in its contracts division. We expect revenue of the
contracts division to have grown 6% yoy following its strong order book and
billing of revenue from the DMRC project. And the pipes division is likely to
have continued its dismal performance as in the previous quarter.
Stable margins. We expect the EBIT margin of the construction division to
come in at 16.5%, vs 15% in the prior quarter and 17% in the year-ago
quarter. However, the manufacturing division is likely to post a minor EBIT
loss as it is almost non-operational. The company is likely to post a 5.6% net
profit margin at the aggregate level.
Robust order book. The order book exceeds `79bn (5.2x TTM revenue),
dominated by water (40%), buildings (30%) and urban infra (30%). During
1HFY14, the company secured orders of `19bn. During the quarter, order
inflows would be the key monitorable.
Pipes to be the laggard. The manufacturing division is likely to post a minor
EBIT loss given that it was non-operational for most of the quarter. Capital
employed in the pipes division was `1.34bn, of the total `6.6bn.
Our take. Execution is likely to pick up on the DMRC project as the
tunnelling work starts from Nov’13. We expect a 16.5% EBITDA margin and
a 5.6% net profit margin. Key monitorables are the company’s orderbook and
the status of its L1 projects. Our target is based on 5x FY14e earnings, a 30%
discount to other midcap construction companies’ target multiples. Risks.
Slowdown in order inflows and margin squeeze.
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Stable performance; Buy
Key takeaways
Restrained revenue performance. For 3QFY14, Pratibha Industries’
revenue, we expect, would have grown 7.8% yoy (up 6% qoq) following a
pickup in revenue growth in its contracts division. We expect revenue of the
contracts division to have grown 6% yoy following its strong order book and
billing of revenue from the DMRC project. And the pipes division is likely to
have continued its dismal performance as in the previous quarter.
Stable margins. We expect the EBIT margin of the construction division to
come in at 16.5%, vs 15% in the prior quarter and 17% in the year-ago
quarter. However, the manufacturing division is likely to post a minor EBIT
loss as it is almost non-operational. The company is likely to post a 5.6% net
profit margin at the aggregate level.
Robust order book. The order book exceeds `79bn (5.2x TTM revenue),
dominated by water (40%), buildings (30%) and urban infra (30%). During
1HFY14, the company secured orders of `19bn. During the quarter, order
inflows would be the key monitorable.
Pipes to be the laggard. The manufacturing division is likely to post a minor
EBIT loss given that it was non-operational for most of the quarter. Capital
employed in the pipes division was `1.34bn, of the total `6.6bn.
Our take. Execution is likely to pick up on the DMRC project as the
tunnelling work starts from Nov’13. We expect a 16.5% EBITDA margin and
a 5.6% net profit margin. Key monitorables are the company’s orderbook and
the status of its L1 projects. Our target is based on 5x FY14e earnings, a 30%
discount to other midcap construction companies’ target multiples. Risks.
Slowdown in order inflows and margin squeeze.
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