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B L Kashyap’s (BLK) Q3FY12 PAT at INR4mn was significantly below our
estimates of INR107mn (down 97% YoY) primarily due to a contraction in
EBITDA margins. Order intake, however, was steady for BLK. We are
revising down our FY12 and FY13 earnings by 58% and 27% respectively
to factor in the weak performance. A likely decline in interest rates will
boost profitability and improve sentiments in the realty segment. We
maintain ‘BUY’ with a target price of INR18/share.
Revenue in line, margin disappoints
BLK’s Q3FY12 revenues at INR4.9bn (up 12% YoY) were broadly in line with our
estimates. However, the major disappointment for the quarter was the contraction in
EBITDA margins which fell 390 bps YoY to 4%. This was due to delays in certain
projects and commodity price hikes. The company has managed to maintain its
working capital cycle and debt at more or less the same levels which mitigated the
impact of rising interest rates to an extent.
Steady order accretion, but focus shifts to boosting margins
Throughout the year, the company has tried to balance the order accretion with
execution. As a result, the order book (INR40bn plus) has remained steady since the
beginning of the year. At this stage, the focus is more on margins rather than revenue
growth.
Outlook and valuations: Attractive; maintain ‘BUY’
While the revenue growth has not been an issue for BLK, margins have emerged as a
big concern. We believe that a possible decline in interest rates will improve the
business scenario by giving a boost to the sentiments in the realty segment. At CMP of
INR14, for revised estimates, the stock is trading at 19.9x and 7.2x for FY12E and FY13E
respectively on a 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) Q3FY12 PAT at INR4mn was significantly below our
estimates of INR107mn (down 97% YoY) primarily due to a contraction in
EBITDA margins. Order intake, however, was steady for BLK. We are
revising down our FY12 and FY13 earnings by 58% and 27% respectively
to factor in the weak performance. A likely decline in interest rates will
boost profitability and improve sentiments in the realty segment. We
maintain ‘BUY’ with a target price of INR18/share.
Revenue in line, margin disappoints
BLK’s Q3FY12 revenues at INR4.9bn (up 12% YoY) were broadly in line with our
estimates. However, the major disappointment for the quarter was the contraction in
EBITDA margins which fell 390 bps YoY to 4%. This was due to delays in certain
projects and commodity price hikes. The company has managed to maintain its
working capital cycle and debt at more or less the same levels which mitigated the
impact of rising interest rates to an extent.
Steady order accretion, but focus shifts to boosting margins
Throughout the year, the company has tried to balance the order accretion with
execution. As a result, the order book (INR40bn plus) has remained steady since the
beginning of the year. At this stage, the focus is more on margins rather than revenue
growth.
Outlook and valuations: Attractive; maintain ‘BUY’
While the revenue growth has not been an issue for BLK, margins have emerged as a
big concern. We believe that a possible decline in interest rates will improve the
business scenario by giving a boost to the sentiments in the realty segment. At CMP of
INR14, for revised estimates, the stock is trading at 19.9x and 7.2x for FY12E and FY13E
respectively on a 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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