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During Q3FY12, Voltas (VOLT) reported a loss of INR1.2bn due to cost
escalation in one of its international projects (Sidra Hospital). Adjusting
for this, together with income from property sale, PAT is at INR612mn, up
2% YoY. Revenue grew 12% on the back of execution pickup in EMPS and
volume growth in UCP segments. EBITDA grew 10% to INR874mn as
margin dipped 10bps YoY to 7.5% (up 510bps QoQ). Order book improved
8% to INR51bn as domestic backlog surged 22%. Inflows grew 93% to
9.6bn. On the back of improved order inflow and margin expansion in
FY12, we raise our earnings for FY12E by 20%. We maintain ‘HOLD’ with
target price of INR 105.
Cost escalation drags down earnings; order inflow better
VOLT’s revenue grew 12% YoY to INR11.6bn. It reported loss of INR1.2bn due to onetime
charge on account of cost escalation in its Sidra Hospital project. Adjusting for the
cost escalation and income from property sales, earnings grew 2.4% to INR612mn
EBITDA grew 10% as margin dipped 10bps YoY to 7.5% (up 510bps sequentially). While
EBIT margin in EMPS improved 90bps to 7.3%, it dipped 360bps to 6.1% in UCP. Margin
in UCP were strained due to: (1) Competitive intensity, (2) inventory liquidation and (3)
increased costs of imports. Going forward, EMPS margin is likely to be under pressure
owing to: (1) Lack of sufficient new orders and (2) high competitive intensity. Order
book improved 8% to INR51bn as domestic backlog surged 22% to INR19bn. Order
inflows during the quarter grew 93% to INR9.6bn led by international geographies at
INR5.6bn.
Outlook and valuations: Challenging; maintain ‘HOLD’
Business environment remains challenging for VOLT across the three segments. New
projects are hard to come in EMPS given the slowdown and excessive competition
(which are likely to keep margin under pressure). UCP margin will remain under
pressure due to competition from Japanese players. On the back of improved order
inflow and margin expansion in FY12, we raise our earnings for FY12E by 20%. On our
revised EPS of INR 8.0 and INR 8.4, the stock is trading at 11.9x and 11.3x respectively.
We maintain ‘HOLD’ recommendation as we move to ‘Sector Performer’ with target
price of INR 105 (Earlier 83).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
During Q3FY12, Voltas (VOLT) reported a loss of INR1.2bn due to cost
escalation in one of its international projects (Sidra Hospital). Adjusting
for this, together with income from property sale, PAT is at INR612mn, up
2% YoY. Revenue grew 12% on the back of execution pickup in EMPS and
volume growth in UCP segments. EBITDA grew 10% to INR874mn as
margin dipped 10bps YoY to 7.5% (up 510bps QoQ). Order book improved
8% to INR51bn as domestic backlog surged 22%. Inflows grew 93% to
9.6bn. On the back of improved order inflow and margin expansion in
FY12, we raise our earnings for FY12E by 20%. We maintain ‘HOLD’ with
target price of INR 105.
Cost escalation drags down earnings; order inflow better
VOLT’s revenue grew 12% YoY to INR11.6bn. It reported loss of INR1.2bn due to onetime
charge on account of cost escalation in its Sidra Hospital project. Adjusting for the
cost escalation and income from property sales, earnings grew 2.4% to INR612mn
EBITDA grew 10% as margin dipped 10bps YoY to 7.5% (up 510bps sequentially). While
EBIT margin in EMPS improved 90bps to 7.3%, it dipped 360bps to 6.1% in UCP. Margin
in UCP were strained due to: (1) Competitive intensity, (2) inventory liquidation and (3)
increased costs of imports. Going forward, EMPS margin is likely to be under pressure
owing to: (1) Lack of sufficient new orders and (2) high competitive intensity. Order
book improved 8% to INR51bn as domestic backlog surged 22% to INR19bn. Order
inflows during the quarter grew 93% to INR9.6bn led by international geographies at
INR5.6bn.
Outlook and valuations: Challenging; maintain ‘HOLD’
Business environment remains challenging for VOLT across the three segments. New
projects are hard to come in EMPS given the slowdown and excessive competition
(which are likely to keep margin under pressure). UCP margin will remain under
pressure due to competition from Japanese players. On the back of improved order
inflow and margin expansion in FY12, we raise our earnings for FY12E by 20%. On our
revised EPS of INR 8.0 and INR 8.4, the stock is trading at 11.9x and 11.3x respectively.
We maintain ‘HOLD’ recommendation as we move to ‘Sector Performer’ with target
price of INR 105 (Earlier 83).
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