CCL Products India - Another Strong Quarter; Outlook Upbeat; Result Update Q3FY15 :: Edelweiss, report

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CCL- Results hit due to maintenance issues. Future Assured.: Nirmal bang

Results hit due to maintenance issues. Future Assured.
Consolidated Revenues for the quarter grew by 23% YoY but were down by 14.4% QoQ at Rs. 177 crore. Sales were below expectations due to trial runs and testing made at the Vietnam plant and some maintenance issues at the Indian plant. In addition, production at Vietnam plant also got affected by 10-12 days due to Chinese New year holidays. Vietnam plant has re-gained operations from the end of April 2013. Company would be adding another 5000 MT capacity by Sep 2013 in Vietnam taking the total capacity to 15000 MT. For FY14E, management expects to produce 6500 MT at the Vietnam plant. CCL operates a 3000 MT plant in Switzerland where it adds value addition to the products. Operations from this unit have been lackluster during the quarter since the Swiss government has imposed additional duty. EBIDTA margins have remained flattish QoQ at 20.8% (despite high power cost) as the company was able to stock up beans when the prices were lower. Coffee prices have remained stable during the quarter. PAT was lower by 25% YoY at Rs.10.9 crore due to higher taxes (39% of PBT) during the quarter. Management expects this to be lower in FY14 since Vietnam would start making profits in FY14E.

Consolidated Construction Consortium Ltd. (CCCL) : 4QFY2012 result review Angel Broking

Angel Broking - Consolidated Construction Consortium - RU4QFY2012 - Result Updates - PDF link

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Consolidated Construction Consortium - RU4QFY2012

Reduce Consolidated Construction Consortium : 2QFY2012 Result Update: Angel Broking

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For CCCL the run of dismal performances continue. Though the company’s
performance on the revenue front was higher than our expectations; however, it
was shocking, to say the least, at the earnings front, due to a substantial dip in
EBITDAM and higher than anticipated interest cost. We are revising our estimates
further downwards for FY2012 and FY2013 and are also assigning lower target
PE multiple (7x from earlier 8x) to factor in the poor performance during the
quarter, persistent weakness in business environment and expected poor
performance in second half of the fiscal. Hence, we downgrade the stock to
Reduce from Neutral with a Target Price of `17.
EBITDAM take a plunge + high interest cost ��Earnings in red: For 2QFY2012,
CCCL’s top line grew by 9.5% yoy to `535.8cr (`489.5cr), against our estimate
of `465.0cr. On the EBITDAM front, the company posted abysmal margin of
1.4% (7.8%), registering a decline of 640bp yoy against our expectation of
261bp. On a sequential basis as well, CCCL’s margin witnessed a 340bp
decline. The decline in margin can be attributed to commodity price pressures
and increased employee and labor costs. Therefore, on the bottom-line front, the
company reported loss of `18.7cr in 2QFY2012 vs. profit of `13.7cr in
2QFY2011, against our expectation of `1.4cr profit, mainly on account of lower
margin and higher interest cost (`17.2cr, a jump of 42.1%/11.3% yoy/qoq).
Outlook and valuation: CCCL has been posting erratic numbers on the EBITDAM
front and consequently has been performing poorly on the earnings front as well
since the last few quarters. We have revised our numbers and PE multiple
downwards owing to the reasons mentioned above. Our revised target price for
CCCL is `17/share based on 7.0x on its FY2013E EPS of `2.4; implying a
downside of ~11% from current levels hence, we downgrade the stock’s rating to
Reduce from Neutral.

Result Previews- Consolidated Construction Consortium (CCCL) : Angel Broking,

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Result Previews
CCCL
Consolidated Construction Consortium (CCCL) is expected to continue its trend of
posting poor numbers on all fronts for 2QFY2012 as well. We expect a 5% decline
on the top-line front to `465.0cr (`489.5cr), given the slow-moving infra orders
forming ~40% of its total order book. On the EBITDA front, we expect CCCL to
continue its dismal performance and register a dip of 261bp yoy to 5.2% (7.8%),
in-line with management’s guidance. Against this backdrop, the bottom line is
expected to post a yoy decline of 90.0% to `1.4cr (`13.7cr) for the quarter.
We maintain our Neutral view on the stock.

Consolidated Construction - Profitability takes a hit; early recovery unlikely; downgrade to Reduce:: Edelweiss

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�� Results below expectations; EBITDA margins dip significantly
Consolidated Construction’s (CCCL) Q4FY11 revenue and PAT were below our
expectations. Revenue, at INR 6.4 bn, was up 30% Q-o-Q and flat Y-o-Y. EBITDA
margin dipped significantly at 3.5% (11.4% in Q4FY10 and 9.7% in Q3FY11). The
decline was due to rise in commodity prices (on fixed price contracts) and higher
revenue contribution from low-margin contracts (36% of revenue in Q4FY11) won
during the downturn. As a result, PAT for the quarter was a minuscule INR 15 mn.

Shareholding patterns:: Business Line,

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With construction stocks, along with their infrastructure and real-estate contemporaries, falling out of favour with the markets, have institutional investors — domestic and foreign — also shunned the stocks?

Domestic institutional investors (DIIs) remained invested, reducing holdings in a little under half the stocks in the construction universe over the past two years. Foreign institutional investors (FIIs) on the other hand, have pared holdings in more than half the stocks, even exiting a few.

We considered the quarterly shareholding patterns over the past two years, for 25 of the bigger construction companies to gauge holding patterns.

Increases and decreases

Between March '09 and '10, DIIs increased stakes in 11 of the 25 companies that make up the construction universe. Stocks such as Simplex Infra, CCCL and Ahluwalia Contracts have seen the maximum holding increases by DIIs. Companies have also not seen DIIs completely liquidating their holdings and exiting the stock.

The disfavour for construction stocks appears to have affected FIIs, with 60 per cent of the stocks seeing reduction in FII holdings between March '09 and December ‘10. FIIs had also exited three stocks by end-December '10 — Atlanta, Tantia Constructions and KNR Constructions — where they had stakes of over 5 per cent.

Favoured stocks

Even as FIIs consistently shed stakes, they did push up stakes in a select few. Stocks that found favour, where both DIIs and FIIs hiked holdings, include C&C Constructions, CCCL, Supreme Infrastructure and Marg Constructions.

Buy CCCL- Target Price: Rs66; Q3FY11 overview: Centrum

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Q3 disappoints; CMP factors all –ves
Consolidated Construction Consortium’s (CCCL) Q3FY11
numbers were disappointing. Revenue at Rs5bn was 17%
below our estimate of Rs6bn. EBITDA and PAT also came
8% and 28% below estimates. However, EBITDA margin
at 9.7% was higher than our estimate of 8.8%. Orderbook
intake during Q3FY11 was Rs2.5bn (Q4FY11TD it is
Rs8.3bn). Current OB is at Rs52bn. Execution has been
ramped-up at the Chennai airport project worth Rs12bn
(expected to be completed by Dec 2011). At CMP of Rs54,
all negatives have been factored-in. However, valuation
of 9.9x FY12E P/E is on a higher side. We recommend
Ahluwalia Contracts (6.3x FY12E P/E) among small caps.
We have cut our FY12 earnings estimates by 27%, but
maintain Buy with a target price of Rs66 (21% upside).

Buy Consolidate Construction Consortium – 3QFY2011; Target Rs.63 - Angel Broking;

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Consolidate Construction Consortium – 3QFY2011 Result Update

Angel Broking maintains a Buy on Consolidate Construction Consortium with a Target Price of Rs. 63.

CCCL extended its disappointing performance this quarter as well. While top-line
came in flat mainly on account of the slow-moving infrastructure orders, margins
positively surprised. However, bottom-line disappointed owing to higher share of
joint venture (JV) profits. We have pruned our FY2011 and FY2012 estimates to
reflect the same. Since our last downgrade in the 2QFY2011 result update, the
stock has fallen by ~35%. However, with the stock trading at reasonable
valuations at current levels, we maintain a Buy.

CONSOLIDATED CONSTRUCTION Strong order book, but execution concerns emerge: Edelweiss

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􀂄 Revenues and PAT below estimates
Consolidated Construction’s (CCCL) revenues and PAT for Q3FY11 were below our
estimates. Revenue, at INR 4.9 bn, was higher 10% Y-o-Y and flat Q-o-Q. EBITDA
margins, at 9.7%, improved 70bps Y-o-Y and 190bps Q-o-Q; margins in the last
quarter were impacted by one-off expenditure of INR 81.7 mn. PAT margin was,
however, hurt due to higher interest rates and stretched working capital cycle. PAT
margin declined 130bps Y-o-Y, to 3.4%, but was higher 60bps Q-o-Q.

CCCL: Q2 disappoints; expect good FY12 : Centrum

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Q2 disappoints; expect good FY12
Consolidated Construction Consortium’s (CCCL) Q2FY11
results came below expectations due to project
execution-related issues. Though operating margin was
impacted, the management has marginally lowered its
FY11 revenue growth guidance to 18% vs 20% earlier
(we factor 28% growth as we believe the management
is very conservative on growth assumption). We have
tweaked our FY11 and FY12 estimates, reducing PAT by
14% and 10%, resp. We maintain Buy with a revised
target price of Rs90 (earlier Rs101), considering 2HFY11
and FY12 revenue would be robust. CCCL remains our
least-preferred construction pick in the sector and we
advise investors to look at Ahluwalia Contracts (ACIL)
on better risk-reward profile (upside 47%).

�� Order-book at Rs45bn is 2.2x TTM revenue: CCCL
bagged orders worth Rs3.4bn in Q2FY11 (Rs21bn in
1HFY11). Q2FY11 order intake is < revenue of Rs4.9bn.

�� Increase in working capital employed expected:
CCCL witnessed a rise in working capital employed
(inline with our expectation) due to increasing debtor
days. The company also faced pressure from vendors
advancing payments.

�� Maintain Buy; but prefer ACIL over CCCL: The stock
price has already corrected by around 7% following the
disappointing Q2 results. At CMP, the stock presents
18% upside to our fair value of Rs90 (12x FY12E EPS of
Rs7.5). We, however, advice investors to consider ACIL
for 47% upside given its better risk-reward profile and
much better operational parameters vs CCCL.

CCCL: Margins hit by extraordinary expenses: Edelweiss

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􀂄 Revenue ahead of estimates; margins hit by extraordinary expenses
Consolidated Construction’s (CCCL) revenues for Q2FY11 were higher than our
estimates; however, margins declined, both at the EBITDA and PAT levels.
Revenues, at INR 4.9 bn, were higher 8.5% Y-o-Y and lower 3.6% Q-o-Q.
Revenue growth was impacted due to heavy rains in some parts of India.
EBITDA margin, at 7.8%, was lower 110bps Y-o-Y and 50bps Q-o-Q. CCCL
booked an extraordinary loss of INR 81.7 mn (explained below); adjusting for
the same, EBITDA margins stood at strong 9.5%. Interest cost for the quarter
stood at INR 121 mn, higher 91% and 15%, Y-o-Y and Q-o-Q, respectively. This
increase, which happened due to many projects being in the mobilisation stage,
adversely affected PAT margins. PAT margins, at 2.8%, were lower 190bps Y-o-Y
and 90bps, Q-o-Q.
􀂄 Order book remains robust at ~INR 45 bn
The company’s order book at the end of the quarter stood at INR 44.9 bn
(against INR 45.2 bn at the end of Q1FY11 and INR 33.9 bn at FY10 end).
Current order book is 2.2x TTM (trailing twelve month) sales and provides
revenue visibility for the future.
􀂄 Outlook and valuations: Margin recovery the key; maintain ‘HOLD’
CCCL’s order book and revenue growth is not a concern; however, margins have
declined both at the operating and PAT levels. The company has indicated that it
has initiated a whole lot of steps to return to higher profitability; this includes
individual project-wise monitoring to look for improvement in working capital
cycle and other operating parameters. The company’s success in arresting its
margin decline is going to be the key going ahead.
We are calibrating our estimates, keeping in mind the performance during
H1FY11. We believe CCCL is likely to post robust growth, driven by improvement
in the macro economic scenario and its expansion into new verticals in the infra
space. Despite a temporary setback, the company remains an excellent bet with
healthy return ratios and a quality management. We value the company using
P/E of 13x for its FY12E PAT, arriving at a target price of INR 85/share. We are
positive on the company and maintain our ‘HOLD’ recommendation. On relative
return basis, the stock is rated ‘Sector Performer’

Consolidated Construction Consortium – 2QFY2011 Result Update - Angel Broking

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Consolidated Construction Consortium – 2QFY2011 Result Update



Consolidated Construction Consortium (CCCL) reported poor set of numbers on
the top-line and operating margin front. Bottom-line was also impacted by higher
interest cost, which resulted in huge de-growth for the quarter. We are pruning
our estimates to factor in lower top-line growth and operating margins and higher
interest cost in 2QFY2011. CCCL has consistently disappointed on the top-line
front, posted erratic margin performance and is currently trading at a premium to
its larger peers. Hence, we are downgrading the stock from Accumulate to
Neutral.


Poor show once again: CCCL disappointed once again on the top-line front in
spite of a low base. It posted a modest growth of 8.5% for the quarter at `489.5cr
(`451.3cr). The dip in margins was mainly on account of higher staff costs (owing
to addition in manpower) and reported EBITDA margin of 7.8% (8.9%). The
company’s bottom-line, which de-grew 34.9%, was impacted by higher interest
cost.


Outlook and Valuation: We are penciling in modest top-line and bottom-line
CAGR of 21% and 16.2% over FY2010-12E, respectively. At current levels, the
stock is trading at P/E of 12.1x and P/BV of 1.9x on FY2012 estimates, which is at
a premium to its larger peers. Thus, given the rich valuations and disappointment
on the execution front, we expect the stock to underperform. Hence, we
downgrade the stock from Accumulate to Neutral with a Fair Value of `80.

Centrum: Q2FY11 Results Preview, CCCL, (September quarter)

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CCCL (Rating – Buy, Target Price – Rs101)
􀂁 We expect NCC to deliver revenue of Rs6bn (growth of 34% YoY and 19% QoQ), contributing to 23%
of our FY11 expectation.
􀂁 We expect EBITDA margins of CCCL to be 8.3% lower than 8.9% in Q2FY10 and net profit to be
Rs250mn (margin of 4.1%, YoY growth of 19%), contributing to 23% of FY11 profitability.
􀂁 Key things to look out for:
o Major projects in bidding pipeline
o Working capital status of the company
o Status of Food SEZ at Tuticorin port
o Competitive intensity in bidding projects. In the case of the airport segment: how many players
bid at the same time.

IIFL recommendations: CCCL (Improving visibility, BUY)

CCCL (Improving visibility, BUY): After posting 26% QoQ order inflow growth in 1Q, CCCL’s Rs45.3bn order book provides robust revenue visibility. Improving pre-qualifications in the power plant, airport and metro rail sectors, coupled with a small base could translate into strong order book growth. We expect margins to move in a narrow band, as higher margins in the Chennai airport project are counter-balanced by low-margin orders booked during the downturn. CCCL has a strong execution history, a systems-driven bidding approach and a keen focus on risk management. Given decent return ratios and 22% EPS CAGR over FY11-13, the stock is attractive at 10.9x FY12ii adjusted PER. We upgrade the stock to BUY.