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Fund raising to fuel growth…
Sadbhav Engineering (SEL) has announced that the Board of Directors of
the company has considered and approved fund raising by way of a
qualified institutions placement (QIP) for an amount not exceeding | 250
crore. The proceeds from the QIP will mainly be used to fund its growth
(capex requirement and WC requirement), going ahead. We maintain our
BUY recommendation on the stock given its strong order book is
providing revenue visibility, well funded equity for BOT projects portfolio,
strong execution track record and better earnings growth.
Raising | 250 crore of equity via QIP to fuel growth…
The Board of Directors on September 9, 2014 has approved fund raising
by way of a QIP for an amount not exceeding | 250 crore. Proceeds from
the QIP will mainly be used to fund its capex and WC requirement. Before
this QIP, we believe 80 lakh warrants issued to promoters would also get
converted into equity. Overall, we anticipate Sadbhav’s equity base would
get diluted by 12.6% (including promoter warrants) to 17.1 crore equity
shares while promoter holding will be maintained at ~47.3%.
BOT project needs | 250 crore as equity; funding largely in place…
SEL has an equity commitment of | 250 crore over the next two years for
the current BOT portfolio. To fund the same, it intends to use proceeds
from the QIP along with NCD proceeds of | 130 crore at SIPL.
Consequently, we do not see any equity gap in the SIPL BOT portfolio. In
terms of financial closure, all BOT projects (except Mysore Bellary) are
financially closed. Currently, the daily toll collection (except MNEL and
DPTL projects where it has a minority stake) stands at ~| 1.2 crore/day.
Going ahead, we anticipate toll collections will jump 2x to | 2.6 crore/day
once all projects are operational in FY17E.
Visibility remains strong in construction business…
In the last two years, SEL witnessed strong orders in the roads & mining
segment, taking the order book from | 7214 crore in FY13 to | 8941 crore
in FY14. The current order book is at | 8,336 crore, at 3.4x FY14 revenues
providing strong revenue visibility. Based on this, we anticipate SEL’s
growth should be back on track. Also, we anticipate standalone revenues
will grow at a CAGR of 19.2% during FY14-16E. Going ahead, we also
anticipate that the EBITDA margin will improve 20 bps to 10.8% during
FY14-16 due to higher proportion of revenues from the high margin
mining segment. Consequently, we expect SEL’s net income to grow at a
CAGR of 10.3% during FY14-16E despite higher depreciation charges. On
a cash profit basis, we anticipate 19.1% CAGR during FY14-16E.
SEL remains our top pick in sector…
SEL remains our top pick in the sector on the back of a strong order book
providing revenue visibility, well funded equity for BOT projects portfolio,
strong execution track record and better earnings growth. We maintain
our BUY recommendation with an SOTP based target price of | 265. We
have valued SEL’s 80% stake in SIPL (BOT subsidiary) at | 160.9/share
and construction business at | 104/share (at 7x FY16 EV/EBITDA).
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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Fund raising to fuel growth…
Sadbhav Engineering (SEL) has announced that the Board of Directors of
the company has considered and approved fund raising by way of a
qualified institutions placement (QIP) for an amount not exceeding | 250
crore. The proceeds from the QIP will mainly be used to fund its growth
(capex requirement and WC requirement), going ahead. We maintain our
BUY recommendation on the stock given its strong order book is
providing revenue visibility, well funded equity for BOT projects portfolio,
strong execution track record and better earnings growth.
Raising | 250 crore of equity via QIP to fuel growth…
The Board of Directors on September 9, 2014 has approved fund raising
by way of a QIP for an amount not exceeding | 250 crore. Proceeds from
the QIP will mainly be used to fund its capex and WC requirement. Before
this QIP, we believe 80 lakh warrants issued to promoters would also get
converted into equity. Overall, we anticipate Sadbhav’s equity base would
get diluted by 12.6% (including promoter warrants) to 17.1 crore equity
shares while promoter holding will be maintained at ~47.3%.
BOT project needs | 250 crore as equity; funding largely in place…
SEL has an equity commitment of | 250 crore over the next two years for
the current BOT portfolio. To fund the same, it intends to use proceeds
from the QIP along with NCD proceeds of | 130 crore at SIPL.
Consequently, we do not see any equity gap in the SIPL BOT portfolio. In
terms of financial closure, all BOT projects (except Mysore Bellary) are
financially closed. Currently, the daily toll collection (except MNEL and
DPTL projects where it has a minority stake) stands at ~| 1.2 crore/day.
Going ahead, we anticipate toll collections will jump 2x to | 2.6 crore/day
once all projects are operational in FY17E.
Visibility remains strong in construction business…
In the last two years, SEL witnessed strong orders in the roads & mining
segment, taking the order book from | 7214 crore in FY13 to | 8941 crore
in FY14. The current order book is at | 8,336 crore, at 3.4x FY14 revenues
providing strong revenue visibility. Based on this, we anticipate SEL’s
growth should be back on track. Also, we anticipate standalone revenues
will grow at a CAGR of 19.2% during FY14-16E. Going ahead, we also
anticipate that the EBITDA margin will improve 20 bps to 10.8% during
FY14-16 due to higher proportion of revenues from the high margin
mining segment. Consequently, we expect SEL’s net income to grow at a
CAGR of 10.3% during FY14-16E despite higher depreciation charges. On
a cash profit basis, we anticipate 19.1% CAGR during FY14-16E.
SEL remains our top pick in sector…
SEL remains our top pick in the sector on the back of a strong order book
providing revenue visibility, well funded equity for BOT projects portfolio,
strong execution track record and better earnings growth. We maintain
our BUY recommendation with an SOTP based target price of | 265. We
have valued SEL’s 80% stake in SIPL (BOT subsidiary) at | 160.9/share
and construction business at | 104/share (at 7x FY16 EV/EBITDA).
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK
http://content.icicidirect.com/mailimages/IDirect_SadbhavEngg_CoUpdate_Sept2014.pdf
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