Consolidated Construction Consortium - 3QFY2012 Result Update - Angel

Consolidated Construction Consortium (CCCL) posted a disappointing set of numbers for 3QFY2012, as expected. The company reported a decline in revenue, with continued dismal performance at EBITDAM level, which along with interest cost burden led to loss at the earnings front. We are revising our estimates further downwards for FY2012 to factor in the poor performance on the revenue front during the quarter; however, we are keeping our FY2013 estimates unchanged. We recommend Reduce on the stock.

Decline in revenue, continued abysmal EBITDAM performance -> Loss at earnings level (as expected): On the top-line front, the company posted a 10.0% yoy decline to Rs.446.5cr, lower than our estimate of Rs.535.9cr. On the EBITDAM front, CCCL continued its dismal performance and registered a dip of 510bp yoy to 4.6%, which was higher than our estimate of 3.2%. Interest cost came in at Rs.18.3cr a yoy/qoq jump of 45.1%/6.4%, respectively, and in-line with our estimate of Rs.18.6cr. Owing to poor show at the revenue and margin level, along with interest burden, the bottom line posted a loss of Rs.3.2cr in 3QFY2012 vs. profit of Rs.16.7cr in 3QFY2011 and against our estimate of loss of Rs.5.2cr.

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 past few quarters. However, in 3QFY2012, the company performed badly on the revenue front as well. Further, slow-moving orders (Rs.1,315cr, 22% of order book) and poor EBITDAM performance expected for another 3-4 quarters would result in subdued performance from CCCL going forward as well. Our target price for CCCL is Rs.17/share based on 7.0x on its FY2013E EPS of Rs.2.4, implying a downside of ~11% from current levels; hence, we recommend Reduce on the stock.

Revenue declines on account of marred execution pace

For 3QFY2012, the company posted a 10.0% yoy decline in its top line to Rs.446.5cr, lower than our estimate of Rs.535.9cr. As per management, the main reasons for this decline were 1) vigorous monsoon season affecting sites in southern India and cyclone affecting the sites in coastal areas; 2) couple of jobs were on hold during the quarter; 3) design and build jobs have stage-wise billing, which impacted turnover.

Slow-moving orders in the infrastructure segment (Rs.2,577cr) as of 3QFY2012 stand at Rs.1,315cr, thus resulting in 22% of order book (Rs.5,906cr) being slow moving.

Projects update

On the Chennai Airport project, CCCL booked revenue of Rs.105cr during the quarter. The company is hopeful of completing the balance project (~Rs.50cr) by April 2012 and is expecting billing for the same by June 2012.

On the 5MW solar power plant front, CCCL expects to achieve completion by February 2012 end. However, the Delhi car park project has not begun yet due to approval pending from Delhi Municipal Corporation, which is expected soon.

Source : Equity Bulls

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