23 February 2015

Supreme Infrastructure - Poised for Strong Growth; Result Update Q3FY15 :: Edelweiss

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Supreme Infrastructure’s (SPII) Q3FY15 sales at INR4.0bn jumped 25% QoQ and beat our INR3.8bn estimate; however, high interest costs hurt earnings with PAT at INR35mn coming in lower than our INR53mn estimate. The company’s INR49bn order book (including L1 orders of ~INR8bn) is 2.6x TTM revenues and provides healthy revenue visibility. On the BOT front, toll revenues were impacted by short-term disruptions, which we expect to get resolved over the next quarter. Fund infusion post the QIP will improve the pace of execution and aid completion of BOT projects. We remain positive on SPII’s growth prospects and believe a sharp recovery is in store. We roll over to FY17E and revise our target price to INR506 (INR502 earlier).
Revenue recovers 25% QoQ, but interest expenses take a toll
SPII’s top line improved QoQ, which at INR4bn jumped 25% QoQ. Operating margin, in spite of declining 50bps QoQ, was strong at 15.2%. Interest costs at INR494mn were the main spoiler, jumping ~20% QoQ. As a result, PAT at INR35mn was lower than our estimate.
Steady progress on BOT front
The company has infused ~INR500mn from QIP funds as equity in its BOT projects. Pending equity commitment is ~INR800mn which will be required in the Jaipur Ring Road (JRR) project in FY17. SPII remains on track to complete 6 under-development BOT projects in FY16, which will take the number of operational projects to 10. In operational projects, toll collection in the Manor Wada project was hit by flyover construction in Bhiwandi city; the same should normalise by FY15 end.

LINK
https://www.edelweiss.in/research/Supreme-Infrastructure--Poised-for-Strong-Growth;-Result-Update-Q3FY15/28425.html

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