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Key Takeaways
Management guides 10% revenue growth for FY12
The management guided revenue growth of 10% in FY12, after robust order intake
of INR79b (up 36%) in FY11. Though the management believes it can achieve 20-
25% growth, given that there is a trade-off between 'growth and payment risk
(working capital)', it has guided just 10% growth in FY12. Its focus is more on
safety of receivables than execution.
The company expects future growth to come from segments like Buildings, Urban
Infrastructure, Power T&D (mainly transmission line towers); its inherent strengths
in piling work enable it to qualify for jobs at the state level.
EBITDA margin expanded 20bp to 9.9% in FY11. Management expects margins to
be maintained in FY12.
Initial traction in order intake, YTDFY12 order intake at INR21b
Simplex's order book at the end of June 2011 was INR143b (up 17% from the end
of June 2010 and down 2.4% from the end of March 2011).
Order intake in 1QFY12 was INR9b (down 55% YoY, down 60% QoQ), driven by
muted intake in the domestic and overseas market. In FY11, thermal power
contributed 22% of the intake and buildings (largely residential) contributed 22%.
This is also positive for margins and the working capital cycle, given that a large
part of private sector projects are on a negotiated basis (and not on L1).
The bid pipeline stands at INR320b, mainly divided into (1) thermal: 35%, (2) industry
and construction: 20%, (3) buildings: 14%, (4) marine: 6%, and (5) 5% each for
bridges and piling, and (6) urban infrastructure: 15%, expected to be converted
into inflows over 12-18 months.
Other takeaways
Working capital position deteriorated further in 1QFY12 and currently stands at 131
days (v/s 126 days in March 2011). This represents a meaningful deterioration from
FY09 levels of 81 days.
The following have contributed to the sharp working capital increase: (1) share of
overseas business, which has shorter payment cycle, has declined to 14% of order
book from 28% earlier, (2) increased proportion of government projects has stretched
working capital cycle, but payment is secured, and (3) few private sector players in
industrial (15% of order book) and real estate (22%) segments have delayed
payments. Current debt stands at INR17.2b, up from INR16.6b as at March 2011.
Valuation and view
Buy with a target price of INR302 (EV of 5x FY13E EBITDA).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Management guides 10% revenue growth for FY12
The management guided revenue growth of 10% in FY12, after robust order intake
of INR79b (up 36%) in FY11. Though the management believes it can achieve 20-
25% growth, given that there is a trade-off between 'growth and payment risk
(working capital)', it has guided just 10% growth in FY12. Its focus is more on
safety of receivables than execution.
The company expects future growth to come from segments like Buildings, Urban
Infrastructure, Power T&D (mainly transmission line towers); its inherent strengths
in piling work enable it to qualify for jobs at the state level.
EBITDA margin expanded 20bp to 9.9% in FY11. Management expects margins to
be maintained in FY12.
Initial traction in order intake, YTDFY12 order intake at INR21b
Simplex's order book at the end of June 2011 was INR143b (up 17% from the end
of June 2010 and down 2.4% from the end of March 2011).
Order intake in 1QFY12 was INR9b (down 55% YoY, down 60% QoQ), driven by
muted intake in the domestic and overseas market. In FY11, thermal power
contributed 22% of the intake and buildings (largely residential) contributed 22%.
This is also positive for margins and the working capital cycle, given that a large
part of private sector projects are on a negotiated basis (and not on L1).
The bid pipeline stands at INR320b, mainly divided into (1) thermal: 35%, (2) industry
and construction: 20%, (3) buildings: 14%, (4) marine: 6%, and (5) 5% each for
bridges and piling, and (6) urban infrastructure: 15%, expected to be converted
into inflows over 12-18 months.
Other takeaways
Working capital position deteriorated further in 1QFY12 and currently stands at 131
days (v/s 126 days in March 2011). This represents a meaningful deterioration from
FY09 levels of 81 days.
The following have contributed to the sharp working capital increase: (1) share of
overseas business, which has shorter payment cycle, has declined to 14% of order
book from 28% earlier, (2) increased proportion of government projects has stretched
working capital cycle, but payment is secured, and (3) few private sector players in
industrial (15% of order book) and real estate (22%) segments have delayed
payments. Current debt stands at INR17.2b, up from INR16.6b as at March 2011.
Valuation and view
Buy with a target price of INR302 (EV of 5x FY13E EBITDA).
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