Weak performance continues… • Supreme Infrastructure :: ICICI Securities, link

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Weak performance continues…
• Supreme Infrastructure (Supreme) reported a 3.2% YoY decline in
topline to ~| 321.5 crore vs. our estimate of | 359.7 crore mainly due
to slower execution, unavailability of work and a delay in release of
funds by clients
• EBITDA margins came in at 15.7%, contracting 11 bps YoY
• The PAT de-grew 70.3% YoY to | 2.6 crore, below our estimate of
| 6.8 crore mainly due to the topline miss
Weak performance continues for sixth quarter…
Supreme reported a 3.2% YoY decline in topline to ~| 321.5 crore and
70.3% YoY decline in bottomline to ~| 2.6 crore in Q2FY15 mainly due to
slower execution, unavailability of work and delay in release of funds by
clients. In the last six quarters, Supreme’s performance has been very
volatile on the back of muted order inflow, weak execution and highly
levered balance sheet.
Order inflows continue to remain muted…
Supreme had an order book of | 6,335 crore in Q1FY14, implying TTM
order book to bill ratio of 3.2x. In the last six quarters, Supreme managed
to bag very dismal orders worth ~| 2,000 crore. There were no major
order inflows in H1FY15. The muted order inflow along with continuous
weak execution has led to a current order book of | 5,296 crore, which
implies a TTM order book to bill ratio of 2.5x. Also, lack of clarity from the
management does not lend us comfort on future order inflows.
Debt reduction through BOT securitisation keeps getting delayed…
Supreme has so far infused total equity of | 911 crore (| 780 crore by
Supreme and remaining by 3i) out of total equity commitment of | 923
crore in its BOT portfolio (11 projects of which five are operational). We
highlight that majority of the equity (~| 600 crore) has been infused
through the parents’ support, which has led to a sharp rise in debt from
| 300 crore in FY10 to | 1159 crore (net debt to equity 1.6x) in Q2FY15.
While the management had indicated that it would look to free up its
equity through securitisation of projects, not much of development has
been seen on that front till date.
Lack of visibility on debt reduction plan…
Supreme’s gross debt has now reached ~| 1,159 crore, implying gross
debt to equity ratio of 1.9x. Also, due to lack of information, we do not
see any visibility on Supreme’s debt reduction plan, going ahead, apart
from BOT securitisation.
Stressed balance sheet along with weak execution; dropping coverage…
Although the business environment is expected to improve with an
economic recovery in sight, we remain wary of the company due to
concerns over dismal order inflows and weak execution. Considering
Supreme’s balance sheet, its high leverage (1.9x gross D/E) would
continue to remain painful to its bottomline. Hence, we are dropping
coverage on the company.
LINK
http://content.icicidirect.com/mailimages/IDirect_SupremeInfra_Q2FY15.pdf