Madhucon Projects - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Madhucon Projects Ltd (MPL) reported a mixed set of numbers with revenue coming in below our expectations. However, a higher EBITDAM resulted in a better-than-expected earnings performance. MPL's order book stands tall at ~Rs.7,000cr (3.2x FY2013E revenue), providing good visibility for the next couple of years. We maintain our Buy recommendation on the stock.

Mixed performance: On the top-line front, MPL posted a disappointing performance with a y-o-y increase of 2.1% to Rs.336cr, way below our expectations of Rs.425cr. As per the management, a ramp up in execution of Barasat Krishnagar and Ranchi Rargon Jamshedpur projects will drive the company's revenue growth going ahead. The EBITDAM came in at 14.0%, flat on a y-o-y basis but posted a jump of 220bp on a q-o-q basis against our expectation of 11.9%. Interest cost stood at Rs.24cr a jump of 15.1% on a y-o-y basis but a decline of 11.3% on a sequential basis. On the earnings front, the company posted a decline of 11.9% yoy at Rs.7cr, higher than our expectations of Rs.5cr. This is despite a higher tax rate (39.5%) on the back of higher EBITDAM and lower-than-expected interest cost.

Outlook and valuation - Raising capital is the key catalyst: MPL has an equity requirement of ~Rs.570cr for its build-operate-transfer (BOT) road projects. We believe the key triggers to watch out for MPL would be a pick-up in execution in the development business and raising money for the same. Hence, we believe until then the stock would be a sector performer and real value would be created only on unlocking at the subsidiary level. We have valued MPL on a SOTP basis to arrive at a target price of Rs.56 and maintain our Buy rating on the stock.

Source : Equity Bulls

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