Lanco Infratech Ltd. - Issues persisting; downgrade to hold ::Emkay

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Lanco Infratech Ltd.

Issues persisting; downgrade to hold

HOLD

CMP: Rs 17                                       Target Price: Rs 23

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n     Lanco’s PAT of Rs137mn was way below est. due to (1) higher inter-seg elimination (66% rev, 80% EBIT) vs our assumption of 60% elimination and higher tax rate of 55%

n     EPC margins at 16.7%, in line and flat yoy but elimination increasing significantly on revenue recognition from subs vs associates earlier - factor in higher elimination of 65%

n     Further delay in Udupi and Anpara COD (best case 3Q). cut earnings by 37/43% in FY12E/13E - driven by delays, elimination, higher fuel cost and lower merchant rates

n     Correction driven by - (1) domestic fuel issues, (2) Udupi and Anpara delays, (3) perdaman case (one still pending), (4) inv. planned in solar despite stretched BS & (5) interest rates; Issues persisting; downgrade to hold