Pratibha Industries Ltd - KJMC

Pratibha Industries Ltd (PIL) reported better than expected Q4FY12 results on strong execution of order book. The consolidated net revenue grew at 33.2% on yoy to Rs 5.17 bn but high interest and depreciation on yoy basis resulted into a flattish PAT at Rs 270.4 mn. The consolidated EBITDA margin for the quarter grew by 95 bps to 13.6%. In FY12, the company has added Rs 33.5 bn of new orders. The order book stood firm at Rs 56.4 bn which excludes Rs 6 bn of orders where it is L1 or preferred bidder. Based on strong order book, the management has given a revenue growth guidance of 20-25% with 13-13.5% of EBITDA margins in the next two years. The company has targeted to achieve an order backlog of Rs 70 bn by the end of FY13.

Key Highlights

Execution remained strong in Q4FY12: The Company reported better than expected consolidated net revenue of Rs 51.7bn with 33.2% yoy growth in Q4FY12. The revenue growth was on the back of strong execution of orders. 50% of the revenue was from water segment, 38% from building segment and balance from Urban Infrastructure project and pipes manufacturing. The management has maintained revenue growth guidance of 20-25% in the next two years.

Maintained margin guidance of 13-13.5% on existing order book: In Q4FY12 the consolidated EBITDA margin improved by 95 bps on yoy to 13.6%. The management has maintained margin guidance of 13-13.5% on the existing orders. The EBITDA for the quarter grew at 43.2% yoy to Rs 702.1 mn whereas PAT fell marginally by 1.3% yoy. The consolidated net debt at the end of the quarter grew from Rs 7.64 bn to Rs 8.85 bn on qoq on account of increased borrowing against funding higher capex and investment in projects. In FY12 the company incurred a capex of ~Rs 4 bn for purchasing equipment and for funding Delhi car parking project.

Targets to achieve Rs 70bn of order backlog by FY13 end: The order backlog of the company remained strong at Rs 56.4 bn (3.4x FY12 consolidated net sales). 52% of orders are from water space, 11% from urban infra and 37% are from building. The order book excludes Rs 6 bn of orders where PIL is L1/preferred bidder. In FY12, the company added Rs 33.5 bn of new orders. The company targets to achieve an order backlog of Rs 70 bn by the end of FY13. Currently it is bidding for Rs 70 bn of new projects related to DMRC phase 3 project in JV. These orders are of larger ticket size of Rs 10-15 bn.

BOT projects on track: In DMRC car parking project, it has leased out 15% of the area and 75% of commercial lease space is expected to be leased out by FY13 end. The construction work at 53 km stretch of Bhopal Sanchi project is in full swing.

Merger of Pratibha Pipes & Structures is on track: Last quarter, the company announced merger of Pratibha Pipes and Structural Limited (PPSL), a promoter group company into Pratibha Industries Ltd and further the manufacturing undertaking including existing pipes business would be hived off into a wholly owned subsidiary. The merger swap ratio was fixed at 6 shares of FV Rs 2 of Pratibha Industries for 1 share of FV Rs 10 of PPSL. The merger process is on track and the company is convening shareholders meeting on 5th June to approve the scheme. The whole process will take approx 2-3 months for completion. In FY12, PPSL reported Rs 2 bn of sales and approx Rs 600 mn of PBT. It had a debt of Rs 850 mn at the end of the year.

Outlook & Valuation

We believe that the company would maintain revenue growth of 20-25% in the next two years based on strong order backlog and new order inflows opportunity in water and urban infra space. But increased debt and high interest cost would negatively impact the PAT growth in FY13. On the basis of FY13E and FY14E fully diluted EPS of Rs 8.7 and Rs 11.6, the stock is currently trading at P/E of 4.5x and 3.4x respectively. We maintain BUY rating on the stock with target price of Rs 52. At our target price, the stock discounts FY13E and FY14E EPS by 6x and 4.5x respectively.

Source : Equity Bulls

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