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Simplex Infrastructure (SINF) reported revenue of INR16b (up 37% YoY) for 3QFY12, significantly higher than
our estimate of INR13.2b. Execution picked up both on the domestic front as well as on overseas business.
Domestic revenue grew 40% YoY to INR14.2b and overseas revenue increased 17% YoY to INR1.3b, as countries
like Ethiopia, Qatar and Bangladesh started contributing.
EBITDA at INR1.26b (up 20.3% YoY) was in-line with our estimate. EBITDA margin stood at 8.1% (down 110bp
YoY) v/s our estimate of 9.5%. The management attributed the decline in EBITDA margin to the initial start-up
cost in certain projects. A lot of new projects are in the initial phases as the order book was ramped up during
the last two quarters. However, blended margin on the order book is still 10.5%+, which the management
expects to achieve in a couple of quarters. PAT declined 22.3% YoY to INR180m v/s our estimate of INR157m.
Net margin stood at 1.1% v/s 2% in 3QFY11, dragged by high net interest cost of INR550m (v/s INR362m in
3QFY11). Debt as at end-December 2011 stood at INR20.5b v/s INR16b as at March 2011.
Order book during the quarter remained stable at INR144b, up 4% YoY. Order intake declined 52% YoY to
INR10b. Intake during Jan-Feb 2012 stood at INR20.9b. So the total intake in 9MFY12 stood at INR59b v/s
INR79b in FY11. Further, SINF has bagged L1 projects worth INR50b. Of the current order book, power segment
contributes 49% (v/s 24% in Dec-10). Share of buildings increased to 30% from 20% in Dec-10. Of this, real
estate forms 16%, where execution is a concern. Share of industrial declined to 3% (v/s 15% in Dec-10).
According to the management, easing interest rate scenario should revive industrial investment.
We have increased our revenue estimates by 6% for FY12 and by 9% for FY13 and PAT estimates by 2% for both
FY12 and FY13 on account of the revival in YTD order intake and better-than-expected execution. To factor in
increased raw material prices, we have lowered our EBITDA margin estimates by 40bp. The stock trades at 9x
FY13E EPS and 5.1x FY13E EV/EBITDA. We maintain Buy with a target price of INR290 (6x FY13E EV/EBITDA).
Working capital day's stands at 120 days v/s 138 days in Sep-2011; capex of
INR2b in FY12
As on Dec-2011, Net Working Capital reduced to 120 days v/s 138 days in Sep-2011,
largely due to lower inventory. Debtor days were contained at 138 days.
Management indicated that the current focus is on managing working capital.
Debt as at end Dec-2011 stood at INR20.5b v/s INR19b as at Sep-2011 and INR16b as
at Mar-2011. Total debt includes working capital loan of INR18b and INR2.9b of
equipment loan.
Valuation and view: Increased FY12 and FY13 earnings by 2% each
We have increased our revenue estimates by 6% for FY12 and 9% for FY13 and PAT
estimates by 2% for FY12 and FY13, given the revival in YTD order intake and
better than expected execution. To factor in increased raw material prices, we
have lowered our EBITDA margin by 40bp.
We now expect SINF to report PAT of INR819m in FY12 (down 34% YoY) and INR1.2b
in FY13 (up 50% YoY), translating into an EPS of INR16.5/sh in FY12 and INR24.6/sh
in FY13.
The stock trades at FY13E P/E of 9x and EV/EBITDA of 5.1x. We maintain Buy with
target price of INR290 at 6x FY13E EV/EBITDA
Company description
Simplex Infrastructure (SINF) began operations (post
takeover by the Mundra family in 1949), with a focus on
high end piling contracts and power projects. Over the
period, SINF has evolved as a diversified infrastructure
player with presence across the infrastructure segments.
SINF has over the past few years successfully built prequalifications
for new verticals like roads, ports (marine),
urban infrastructure, civil and industrial construction.
Unlike peers, it has ~60% of business from the private
clients/PPP and has presence in India and Middle East.
Currently, it derives ~35% of the revenues from private
clients/PPP, 35% from central Government and 30% from
overseas markets.
Key investment arguments
Improved visibility in terms of order intake, across
segments / geographies. Order backlog at the end
of December 2011 is INR144b.
SINF has one of the most diversified businesses with
presence across infrastructure sector. It also derives
~10% of the order book from Middle East, reducing
risk of over dependence of Indian market. Private
sector contributes 65% of order book, which has
better payment terms.
Key investment risks
SINF has order book to bill ratio of 3x, which has
improved in past 2-3 quarters. This will impact near
term revenue growth
Valuation and View
The stock trades at FY13E P/E of 9x and EV/EBITDA of
5.1x. We maintain Buy with target price of INR290 at
6x FY13E EV/EBITDA.
Sector view
Order intake from Public and private clients has
already witnessed marginal revival. Going forward
while the public capex would be strong; the private
capex could also revive. Inquiries from Middle East
are also expected to improve. We remain positive
on the pick up in infrastructure spending and thus
the construction sector.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Simplex Infrastructure (SINF) reported revenue of INR16b (up 37% YoY) for 3QFY12, significantly higher than
our estimate of INR13.2b. Execution picked up both on the domestic front as well as on overseas business.
Domestic revenue grew 40% YoY to INR14.2b and overseas revenue increased 17% YoY to INR1.3b, as countries
like Ethiopia, Qatar and Bangladesh started contributing.
EBITDA at INR1.26b (up 20.3% YoY) was in-line with our estimate. EBITDA margin stood at 8.1% (down 110bp
YoY) v/s our estimate of 9.5%. The management attributed the decline in EBITDA margin to the initial start-up
cost in certain projects. A lot of new projects are in the initial phases as the order book was ramped up during
the last two quarters. However, blended margin on the order book is still 10.5%+, which the management
expects to achieve in a couple of quarters. PAT declined 22.3% YoY to INR180m v/s our estimate of INR157m.
Net margin stood at 1.1% v/s 2% in 3QFY11, dragged by high net interest cost of INR550m (v/s INR362m in
3QFY11). Debt as at end-December 2011 stood at INR20.5b v/s INR16b as at March 2011.
Order book during the quarter remained stable at INR144b, up 4% YoY. Order intake declined 52% YoY to
INR10b. Intake during Jan-Feb 2012 stood at INR20.9b. So the total intake in 9MFY12 stood at INR59b v/s
INR79b in FY11. Further, SINF has bagged L1 projects worth INR50b. Of the current order book, power segment
contributes 49% (v/s 24% in Dec-10). Share of buildings increased to 30% from 20% in Dec-10. Of this, real
estate forms 16%, where execution is a concern. Share of industrial declined to 3% (v/s 15% in Dec-10).
According to the management, easing interest rate scenario should revive industrial investment.
We have increased our revenue estimates by 6% for FY12 and by 9% for FY13 and PAT estimates by 2% for both
FY12 and FY13 on account of the revival in YTD order intake and better-than-expected execution. To factor in
increased raw material prices, we have lowered our EBITDA margin estimates by 40bp. The stock trades at 9x
FY13E EPS and 5.1x FY13E EV/EBITDA. We maintain Buy with a target price of INR290 (6x FY13E EV/EBITDA).
Working capital day's stands at 120 days v/s 138 days in Sep-2011; capex of
INR2b in FY12
As on Dec-2011, Net Working Capital reduced to 120 days v/s 138 days in Sep-2011,
largely due to lower inventory. Debtor days were contained at 138 days.
Management indicated that the current focus is on managing working capital.
Debt as at end Dec-2011 stood at INR20.5b v/s INR19b as at Sep-2011 and INR16b as
at Mar-2011. Total debt includes working capital loan of INR18b and INR2.9b of
equipment loan.
Valuation and view: Increased FY12 and FY13 earnings by 2% each
We have increased our revenue estimates by 6% for FY12 and 9% for FY13 and PAT
estimates by 2% for FY12 and FY13, given the revival in YTD order intake and
better than expected execution. To factor in increased raw material prices, we
have lowered our EBITDA margin by 40bp.
We now expect SINF to report PAT of INR819m in FY12 (down 34% YoY) and INR1.2b
in FY13 (up 50% YoY), translating into an EPS of INR16.5/sh in FY12 and INR24.6/sh
in FY13.
The stock trades at FY13E P/E of 9x and EV/EBITDA of 5.1x. We maintain Buy with
target price of INR290 at 6x FY13E EV/EBITDA
Company description
Simplex Infrastructure (SINF) began operations (post
takeover by the Mundra family in 1949), with a focus on
high end piling contracts and power projects. Over the
period, SINF has evolved as a diversified infrastructure
player with presence across the infrastructure segments.
SINF has over the past few years successfully built prequalifications
for new verticals like roads, ports (marine),
urban infrastructure, civil and industrial construction.
Unlike peers, it has ~60% of business from the private
clients/PPP and has presence in India and Middle East.
Currently, it derives ~35% of the revenues from private
clients/PPP, 35% from central Government and 30% from
overseas markets.
Key investment arguments
Improved visibility in terms of order intake, across
segments / geographies. Order backlog at the end
of December 2011 is INR144b.
SINF has one of the most diversified businesses with
presence across infrastructure sector. It also derives
~10% of the order book from Middle East, reducing
risk of over dependence of Indian market. Private
sector contributes 65% of order book, which has
better payment terms.
Key investment risks
SINF has order book to bill ratio of 3x, which has
improved in past 2-3 quarters. This will impact near
term revenue growth
Valuation and View
The stock trades at FY13E P/E of 9x and EV/EBITDA of
5.1x. We maintain Buy with target price of INR290 at
6x FY13E EV/EBITDA.
Sector view
Order intake from Public and private clients has
already witnessed marginal revival. Going forward
while the public capex would be strong; the private
capex could also revive. Inquiries from Middle East
are also expected to improve. We remain positive
on the pick up in infrastructure spending and thus
the construction sector.
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