Madhucon Projects - Power(ed) execution; Maintain 'BUY' - TP Rs107 - PINC Research

Q3FY12 Result Review - Madhucon Projects

Power(ed) execution

Madhucon Projects (MPL) positively surprised with sales growth of 77.5% YoY to Rs6.3bn (PINCe Rs4.8bn and consensus Rs4.5bn). However, operating margin was lower at 8.4%, a dip of 429bps YoY, due to higher purchasing cost as new projects came into execution and ramp-up in power projects. Another surprise was lower interest cost at Rs298mn down 6.4% due to reduction and restructuring of debt. PAT came in at Rs75mn (PINCe Rs83mn) and consensus was at Rs53mn. Strong order inflow during the quarter and better execution has led to increase our topline estimate by 8.9% for FY13E and PAT by 53.9% to Rs480mn. We maintain our BUY recommendation on the stock with a target price of Rs107.

- Sales driven by Phase II power project
- Strong order inflow; Order book at Rs68.7bn
- Operational BOT projects
- Bagged Indonesian power project

VALUATIONS & RECOMMENDATION

Better execution in the quarter, coupled by good order inflow has improved visibility for MPL standalone business. Moreover, phase II power project seems on schedule. For FY13E we have increased our topline by 8.9%, margin by 20bps and a marginal decline in interest cost (due to lower debt) has increased our PAT estimate by 53.9% to Rs480mn. The key for MPL, going forward, will be fructification of dilution at Madhucon Infrastructure level and reduction in debt in the standalone entity; else it may take more time than anticipated to attain the intrinsic value of its assets. We maintain our 'BUY' recommendation on the stock with a target price of Rs107.

Source : Equity Bulls

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