Consolidated Construction Consortium – 2QFY2011 Result Update - Angel Broking

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Consolidated Construction Consortium – 2QFY2011 Result Update



Consolidated Construction Consortium (CCCL) reported poor set of numbers on
the top-line and operating margin front. Bottom-line was also impacted by higher
interest cost, which resulted in huge de-growth for the quarter. We are pruning
our estimates to factor in lower top-line growth and operating margins and higher
interest cost in 2QFY2011. CCCL has consistently disappointed on the top-line
front, posted erratic margin performance and is currently trading at a premium to
its larger peers. Hence, we are downgrading the stock from Accumulate to
Neutral.


Poor show once again: CCCL disappointed once again on the top-line front in
spite of a low base. It posted a modest growth of 8.5% for the quarter at `489.5cr
(`451.3cr). The dip in margins was mainly on account of higher staff costs (owing
to addition in manpower) and reported EBITDA margin of 7.8% (8.9%). The
company’s bottom-line, which de-grew 34.9%, was impacted by higher interest
cost.


Outlook and Valuation: We are penciling in modest top-line and bottom-line
CAGR of 21% and 16.2% over FY2010-12E, respectively. At current levels, the
stock is trading at P/E of 12.1x and P/BV of 1.9x on FY2012 estimates, which is at
a premium to its larger peers. Thus, given the rich valuations and disappointment
on the execution front, we expect the stock to underperform. Hence, we
downgrade the stock from Accumulate to Neutral with a Fair Value of `80.