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C o n s t r u c t i o n b u s i n e s s v i s i b i l i t y l o w …
Patel Engineering Ltd’s (PEL) Q1FY12 results were better on the topline
and margins front due to stronger construction revenues. However,
despite stronger EBITDA margins of 15.5% vs. our estimates of 12.5%,
the bottomline was marred by higher interest expenses of | 63.4 crore vs.
our estimate of | 48.6 crore. With the current order book (post adjustment
of contentious orders) providing low revenue visibility of less than two
years, concerns remain on revenue visibility from the construction
segment. We maintain our HOLD recommendation on the stock.
ƒ Better margins negated by high interest cost
PEL reported better Q1FY12 results on the topline and margins front
due to stronger than anticipated construction execution. However, the
bottomline was impacted by higher interest cost of | 63.4 crore, up
~95% YoY due to high debt level and rise in interest rates.
Consequently, the company reported PAT of | 15.9 crore despite
stronger margins of 15.5% vs. our estimates of 12.5%.
ƒ Visibility low on construction order book
The company has failed to bag any major orders in the last couple of
quarters and the order book stands at | 9,500 crore, 2.7x book to bill
ratio. However, adjusting for AP (| 1,500 crore) and contentious
orders (| 1,500 crore –Kotlibel, | 300 crore from Tanzania), the order
book to bill ratio stands at 1.7x, providing low revenue visibility of less
than two years. With no clarity on the Telangana issue and
uncertainty on the Kotlibel project, we do not see any traction in these
orders in the near term. Therefore, order inflow is the need of the
hour for visibility in the construction business, going forward.
V a l u a t i o n
At the CMP, PEL is trading at a P/E of 7.1x in FY13E. Considering the
execution delays in construction segment, concerns over margins, lower
visibility on current order book, high debt level, lack of clarity over tax
raids, etc, we recommend HOLD with SOTP price target of | 102/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
C o n s t r u c t i o n b u s i n e s s v i s i b i l i t y l o w …
Patel Engineering Ltd’s (PEL) Q1FY12 results were better on the topline
and margins front due to stronger construction revenues. However,
despite stronger EBITDA margins of 15.5% vs. our estimates of 12.5%,
the bottomline was marred by higher interest expenses of | 63.4 crore vs.
our estimate of | 48.6 crore. With the current order book (post adjustment
of contentious orders) providing low revenue visibility of less than two
years, concerns remain on revenue visibility from the construction
segment. We maintain our HOLD recommendation on the stock.
ƒ Better margins negated by high interest cost
PEL reported better Q1FY12 results on the topline and margins front
due to stronger than anticipated construction execution. However, the
bottomline was impacted by higher interest cost of | 63.4 crore, up
~95% YoY due to high debt level and rise in interest rates.
Consequently, the company reported PAT of | 15.9 crore despite
stronger margins of 15.5% vs. our estimates of 12.5%.
ƒ Visibility low on construction order book
The company has failed to bag any major orders in the last couple of
quarters and the order book stands at | 9,500 crore, 2.7x book to bill
ratio. However, adjusting for AP (| 1,500 crore) and contentious
orders (| 1,500 crore –Kotlibel, | 300 crore from Tanzania), the order
book to bill ratio stands at 1.7x, providing low revenue visibility of less
than two years. With no clarity on the Telangana issue and
uncertainty on the Kotlibel project, we do not see any traction in these
orders in the near term. Therefore, order inflow is the need of the
hour for visibility in the construction business, going forward.
V a l u a t i o n
At the CMP, PEL is trading at a P/E of 7.1x in FY13E. Considering the
execution delays in construction segment, concerns over margins, lower
visibility on current order book, high debt level, lack of clarity over tax
raids, etc, we recommend HOLD with SOTP price target of | 102/share.
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