Sadbhav Engineering - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Sadbhav Engineering (SEL) reported a poor set of numbers, which were significantly below our and consensus estimates. SEL had an order inflow of Rs.352cr during 1QFY2013, taking its order book to Rs.7,214cr (2.9x FY2013E revenue), which provides good revenue visibility. We maintain our Buy view on the stock.

Bonus income saves the day: On the top-line front, SEL reported a staggering 31.2% yoy decline to Rs.421cr, which is much below our and the street's estimate of Rs.640cr and Rs.604cr respectively. This dismal performance has been owing to lower execution pace in the remaining under-construction projects after SEL achieved completion of two projects in 4QFY2012. On the margin front, the company posted an EBITDAM of 9.3%, ie a dip of 180bp on a y-o-y basis and lower than our estimate of 10.3%. Interest cost stood at Rs.17cr, registering a jump of 12.7% on a q-o-q basis. Despite lower-than-expected revenue and EBITDAM, on the earnings front, SEL reported a 55.0% y-o-y increase to Rs.52cr, higher than our expectation of Rs.41cr, owing to an exceptional income of Rs.60.9cr (performance bonus owing to early completion of projects).

Outlook and valuation: For FY2013, SEL has reiterated flat performance on the revenue front as SEL expects two recently won BOT projects - Gomti ka Chauraha and Solapur Bijapur to contribute ~Rs.500cr in FY3013. However, we have revised our FY2013 estimates downwards as the company's guidance looks aggressive given the poor 1QFY2013 performance. We continue to maintain our Buy view on the stock with a sum-of-the-parts (SOTP) target price of Rs.182, owing to robust order backlog of Rs.7,214cr (2.9x FY2013E revenue), strong balance sheet and as the company's equity requirement for under-construction/development projects is expected to be met by internal accruals.

Source : Equity Bulls

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