Tecpro Systems Limited - Soldiering on - Antique

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Earnings

Tecpro Systems Limited (Tecpro) reported sales of INR6.3bn (+36% YoY) as it stepped up project execution. However, operating profitability declined 150bps, as inflation in material costs dented operational profitability. EBIDTA in 3QFY12 stood at INR609m (+18% YoY). There was a significant jump in capital charges, primarily interest, on account of heightened working capital borrowings, due to which PAT declined 26% YoY to INR147m.

Revenue guidance cut toned down while margin guidance maintained

The management has revised its revenue growth expectations for FY12e to 25-30% from 35-40% on account of sluggish ordering and postponement of capex. The guidance in order inflow for FY12e has been lowered to INR25bn vs. INR45- 50bn at the start of the fiscal year. However, it maintained its guidance of 15% EBITDA margins for FY12e. Consequently, we have revised our revenue estimates on the back of deteriorating visibility in order book and our new EPS estimates for FY12e and FY13e stands at INR27 and INR28 (previously at INR32 and INR34), respectively.

Order inflow subdued, restricted by poor operating environment

Order inflow in 3QFY12 was INR7bn (INR16.3bn for 9MFY12). This included: a) orders worth INR4.bn from NTPC; b) Ambuja Cements worth INR605m. The order current backlog stood at INR46bn (~1.9x TTM sales).

Going forward, the company mentioned that order book accretion would be on account of supplies for material/coal handling plants, CPPs and WHRS and that BOP orders would not be forthcoming in the next couple of quarters.

Valuation and outlook, maintain BUY

We have revised our estimates for FY12e and FY13e. Our EPS for FY13e stands at INR28. We are valuing stock at 9x FY13e earnings and arrive at a revised target price of INR251.

Source : Equity Bulls

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