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RATING....................................................................................... Changed from Buy to Hold
W e a k s h o w …
Hindustan Dorr Oliver (HDO) delivered its Q3FY12 results below our
estimates. Revenues came in line with our estimates at | 185 crore (Idirect estimate: | 187 crore). Margins remained suppressed at
both EBITDA and PAT levels. HDO reported a subdued EBITDA margin
of 7.7% vs. our estimate of 10%. The key dampener for the subdued
performance was interest outgo of | 12.6 crore (up 112% YoY and 12%
QoQ), which impacted the PAT adversely. Hence, Q3FY12 registered a
PAT of | 3.2 crore, implying a decline of 79% YoY vs. our expectation of
69% YoY decline.
ƒ Highlights for the quarter …
Order backlog at | 1400 crore (excludes L1 orders worth | 500 crore)
poses risk to revenue growth going into FY13E, if L1 orders do not get
confirmed. Out of the order backlog, minerals comprise 53% share
whereas the water segment and special projects constitute 18% and
13% of the backlog, respectively. The company has bid for | 4000-5000
crore worth of orders alone in NMDC tenders. Weak execution in FY12E
will lead to revenue decline of 24% YoY. In FY13E, a low base and
expected pick-up in execution will drive revenues by 20% YoY. At the
same time, we expect margins to be in the range of 8.5-10% in FY12E
and FY13E. The European Subsidiary bagged orders worth £3.2 million
in Q3FY12 and for 9MYTD booked revenues to the tune of | 90 crore.
V a l u a t i o n
The stock is trading at 13.6x and 7.5x on its FY12E and FY13E EPS,
respectively. We believe anticipation of interest rate cuts has resulted in
the stock price rallying by 64% YTD. However, a significant re-rating will
be on the cards only when order inflows pick up, which will improve the
earnings trajectory for the company. We have valued the stock at 8x its
FY13E EPS to arrive at a target price of | 40 per share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RATING....................................................................................... Changed from Buy to Hold
W e a k s h o w …
Hindustan Dorr Oliver (HDO) delivered its Q3FY12 results below our
estimates. Revenues came in line with our estimates at | 185 crore (Idirect estimate: | 187 crore). Margins remained suppressed at
both EBITDA and PAT levels. HDO reported a subdued EBITDA margin
of 7.7% vs. our estimate of 10%. The key dampener for the subdued
performance was interest outgo of | 12.6 crore (up 112% YoY and 12%
QoQ), which impacted the PAT adversely. Hence, Q3FY12 registered a
PAT of | 3.2 crore, implying a decline of 79% YoY vs. our expectation of
69% YoY decline.
ƒ Highlights for the quarter …
Order backlog at | 1400 crore (excludes L1 orders worth | 500 crore)
poses risk to revenue growth going into FY13E, if L1 orders do not get
confirmed. Out of the order backlog, minerals comprise 53% share
whereas the water segment and special projects constitute 18% and
13% of the backlog, respectively. The company has bid for | 4000-5000
crore worth of orders alone in NMDC tenders. Weak execution in FY12E
will lead to revenue decline of 24% YoY. In FY13E, a low base and
expected pick-up in execution will drive revenues by 20% YoY. At the
same time, we expect margins to be in the range of 8.5-10% in FY12E
and FY13E. The European Subsidiary bagged orders worth £3.2 million
in Q3FY12 and for 9MYTD booked revenues to the tune of | 90 crore.
V a l u a t i o n
The stock is trading at 13.6x and 7.5x on its FY12E and FY13E EPS,
respectively. We believe anticipation of interest rate cuts has resulted in
the stock price rallying by 64% YTD. However, a significant re-rating will
be on the cards only when order inflows pick up, which will improve the
earnings trajectory for the company. We have valued the stock at 8x its
FY13E EPS to arrive at a target price of | 40 per share.
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