HCC - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, HCC continued its poor performance on the numbers front as expected. HCC's top line came in higher-than-expected owing to inclusion of arbitration award in the top line. Further, abysmal EBITDAM and high interest cost lead to higher-than-expected loss at the earnings level. The total outstanding order book stands at Rs.15,336cr (excluding L1 orders of Rs.1,713cr) with muted order inflow of Rs.1,889cr (decline of ~44% on yoy basis) for FY2012. Owing to concerns such as slowdown in order inflow, high debt and stretched working capital, we remain Neutral on the stock.

Dismal performance continues: On the top-line front, HCC's revenue declined by 3.9% yoy to Rs.1,156cr against our estimate of Rs.1,022cr. However, it includes ~Rs.166cr (total arbitration award Rs.256cr) of arbitration award excluding which it would have stood at ~Rs.990cr. EBITDAM came in at shocking 7.6%, a dip of 680bp yoy and lower than our estimate of 11.8%. On the earnings front, HCC reported a loss of Rs.54cr vs. profit of Rs.23cr in 4QFY2011, against our estimate of loss of Rs.23cr owing to lower EBITDA margin and higher interest cost. Interest cost witnessed an increase of 39.4% and 6.3% on yoy and qoq basis respectively.

Outlook and valuation: On the back of poor performance in 4QFY2012 we are revising our estimates downwards for FY2013 and FY2014. The outlook for HCC remains bleak given the fact that its execution has slowed down considerably; its balance sheet is loaded with debt resulting in high interest cost. Although HCC is hoping to get approval for final debt restructuring package in next 30-35 days we believe HCC has long way to go before the company is able to turnaround itself. Hence we continue to maintain our Neutral view on the stock. Further, in the infrastructure space, we believe there are better bets than HCC such as L&T, Sadbhav and IRB.

Source : Equity Bulls

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