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B L Kashyap’s (BLK) Q2FY12 PAT, at INR107mn (up 5% YoY), was ahead of
our estimate, primarily due to strong execution and improvement in
working capital cycle. Margin improvement is the company’s key focus
area. We are broadly maintaining our FY12 earnings estimates. Maintain
‘BUY’.
Revenue continues to surprise positively, margin improves
BLK’s Q2FY12 revenue at INR5.2bn grew a sharp 68% YoY, much ahead of our INR4.4bn
estimate. EBITDA margin also improved QoQ to 6.2%. The company managed to
improve its working capital cycle, which led to reduction in debt and helped contain
the impact of rising interest rate. PAT margin came in at 2%, up 160bps QoQ.
Order inflow steady; to focus on margin
The company’s order intake continued to match its execution, which means that the
order book (INR40bn plus) has not changed much since the start of the year. BLK is
focusing on margin rather than top line growth in the face of tough commodity prices
and interest rate scenario. It is negotiating for full escalation based contracts to
insulate against margin volatility.
Outlook and valuations: Attractive; maintain ‘BUY’
BLK has done well on the revenue growth front when most other peers are facing
difficulties. However, rising commodity prices and interest rates have dented
execution. Working capital improvement is a big positive, in our view. While we have
broadly maintained our estimates for FY12, continued cost challenges due to the tough
realty environment has led us to calibrate our PAT estimate down 8% for FY13. At CMP
of INR10, for revised estimates, the stock is trading at 6.0x and 4.0x for FY12E and
FY13E, respectively, on P/E basis. Any value arising from development or outright sale
of its realty projects will provide upsides to our estimates, acting as a positive trigger
for the stock. We maintain ‘BUY’.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
B L Kashyap’s (BLK) Q2FY12 PAT, at INR107mn (up 5% YoY), was ahead of
our estimate, primarily due to strong execution and improvement in
working capital cycle. Margin improvement is the company’s key focus
area. We are broadly maintaining our FY12 earnings estimates. Maintain
‘BUY’.
Revenue continues to surprise positively, margin improves
BLK’s Q2FY12 revenue at INR5.2bn grew a sharp 68% YoY, much ahead of our INR4.4bn
estimate. EBITDA margin also improved QoQ to 6.2%. The company managed to
improve its working capital cycle, which led to reduction in debt and helped contain
the impact of rising interest rate. PAT margin came in at 2%, up 160bps QoQ.
Order inflow steady; to focus on margin
The company’s order intake continued to match its execution, which means that the
order book (INR40bn plus) has not changed much since the start of the year. BLK is
focusing on margin rather than top line growth in the face of tough commodity prices
and interest rate scenario. It is negotiating for full escalation based contracts to
insulate against margin volatility.
Outlook and valuations: Attractive; maintain ‘BUY’
BLK has done well on the revenue growth front when most other peers are facing
difficulties. However, rising commodity prices and interest rates have dented
execution. Working capital improvement is a big positive, in our view. While we have
broadly maintained our estimates for FY12, continued cost challenges due to the tough
realty environment has led us to calibrate our PAT estimate down 8% for FY13. At CMP
of INR10, for revised estimates, the stock is trading at 6.0x and 4.0x for FY12E and
FY13E, respectively, on P/E basis. Any value arising from development or outright sale
of its realty projects will provide upsides to our estimates, acting as a positive trigger
for the stock. We maintain ‘BUY’.
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