Nagarjuna Construction - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, Nagarjuna Construction Company (NCC) posted better-than expected numbers on the revenue and earnings front. However, the company disappointed on the EBITDAM level. The current outstanding order book of NCC stands at Rs.20,196cr, with order inflow of Rs.10,116cr (including captive power order worth Rs.5,186cr) for FY2012. We maintain our Buy view on the stock.

Earnings pulled down by poor EBITDAM and higher interest cost, despite higher revenue: For 4QFY2012, on the top-line front, NCC reported a jump of 21.0% yoy to Rs.1,755cr, which was higher than our expectation of Rs.1,429cr. On the EBITDAM front, the company's margin was disappointing at 5.8%, a dip of 320bp yoy and lower than our estimate of 7.4%. As per the company, provisions, time and cost overruns and higher input costs resulted in lower EBITDAM for the quarter. Interest cost came in at Rs.98cr, registering a yoy jump of 19.9% but a decline of 8.1% on a sequential basis. On the bottom-line level, NCC reported a yoy decline of 69.7% to Rs.11cr, almost in-line with our estimate of Rs.10cr despite posting higher revenue owing to lower EBITDAM and higher interest cost.

Outlook and valuation: NCC's performance on the revenue front in 4QFY2012 was a positive surprise, but poor EBITDAM and higher interest cost continue to affect the company's earnings in a negative way. Thus, we are revising our estimates downwards for FY2013 and FY2014, respectively, mainly to factor in poor performance at the EBITDAM level and as we do not expect the company to get respite from its high debt and stretched working capital in the near future. However, after a steep correction (46.2%) in the past three months, the stock is currently trading at low valuation of 0.3x FY2014E P/BV (standalone) and, hence, we maintain our Buy view on the stock with an SOTP target price of Rs.41.

Source : Equity Bulls

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