Reduce Hind-Dorr Oliver - Kotak

HDO's Q4FY12 numbers are ahead of our estimates on the revenue and profit front. However, the business environment remains challenging for the company. Balance sheet remains leveraged at 1.4x due to high working capital.

- HDO's order backlog at the end of Q4 FY12 stood at Rs 19 bn (including L1 orders of Rs 6.0 bn). Out of the present order backlog, the overseas order of Rs 4.2 bn in Zambia for Konkola Copper Mines is yet to start. Thus essentially, the company has ongoing orders of around Rs 10 bn only, which implies weak revenue booking in the near-term. We have forecast revenue to decline in FY13.

- The company has extended its fiscal FY12 by three months to end on June 30, 2012. Accordingly, we have made adjustments to our forecasts. However, to provide a like-to-like comparison, annualized FY13 earnings (April 2012-Mar 2013) works out to Rs 2.3 per share. Accordingly, the stock is trading at 15.3x FY13 Ann earnings. Maintain Reduce on stressed balance sheet and close to fair valuations.

Source : Equity Bulls

Keywords