HCC - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, HCC continued its poor performance on the numbers front as expected. HCC's top line came in line with our estimate. The company's dismal performance at the EBITDAM level continued for second consecutive quarter. Despite poor show at EBITDAM, loss at earnings level was lower than our estimate owing to higher other income. The total outstanding order book stands at Rs.15,020cr (excluding L1 orders of Rs.3,439cr) with muted order inflow of ~Rs.100cr during the quarter. Owing to concerns such as slowdown in order inflow, high debt and stretched working capital, we remain Neutral on the stock.

Lower EBITDA offset by higher other income: On the top-line front, HCC's revenue declined by 8.4% yoy to Rs.969cr in line with our estimate of Rs.973cr. EBITDAM came in at dismal 7.1%, a dip of 590bp yoy and lower than our estimate of 10.6%. Further, HCC's management hopes to maintain EBITDAM at ~11% for FY2013. On the earnings front, HCC reported a loss of Rs.31cr vs. profit of Rs.3cr in 1QFY2012, against our estimate of loss of Rs.61cr. Loss was lower than our estimate owing to jump in other income (includes Rs.26cr from sale of land) and exceptional item of Rs.9.5cr (reversal of interest cost for 4QFY2012). Interest cost witnessed an increase of 37.5% on yoy basis and came in at Rs.128cr.

Outlook and valuation: 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 has got approval for debt restructuring package to the tune of ~Rs.3,200cr 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 and Sadbhav.

Source : Equity Bulls

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