Sanghvi Movers - Revenue slump; Sell - Anand Rathi

On the back of increased competition and lower demand for cranes, Sanghvi Movers (Sanghvi) reported below estimated topline, down 19.1% yoy (20% below expectation). EBITDA margin, was also down 267bps, causing EBITDA to decline 22% yoy. Hence, profit declined 22.8%, to Rs.112m. Sanghvi's sales declined 12.1% in 1HFY13.

- Sales slowdown. Sanghvi's 2QFY13 sales declined 19.1% yoy to Rs.884m (slowest in the past few quarter), affected by sharp decline in business from sectors like windmill and power. Sales contribution from windmill/power/refineries/cement/steel/others segment was stable. We expect FY13 to be a tough year for the company's business on account of decline in orders from windmill and power segment.

- Margins dip. EBITDA margins were down 267bps yoy (significantly down 645bps qoq), primarily owing to lower yields due to higher competition. Going forward, margins are likely to remain at similar levels due to discounts offered. Yields during 2QFY13 would be slightly lower than 2.86% during FY12 owing to intensifying competition, and so will be utilization. In FY12, utilization was at 87% versus 82% in FY11. Profit decline. Lower margins and other income (down 93% yoy) pulled profit down 22.8% yoy, to Rs.112m (we estimated Rs.190m). Other income, high on account of sale of cranes in earlier years, was down 93% yoy at Rs.2m.

- Valuation. Debt as on FY12 was Rs.7.5bn. We believe with no capex during the next two years, debt would reduce 50%. The stock is trading at 6.8x FY13e and 4.8x FY14e earnings. We recommend Sell. Risks: Increased demand, lower interest rates.

Source : Equity Bulls

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