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Research
Madhucon Projects - Q3FY13 Result Update - Kotak
Posted On : 2013-02-16 20:18:00( TIMEZONE : IST )
Result highlights: Madhucon Projects reported a sharp decline in revenue growth and stood much lower than our estimates. Continued high interest expenses coupled with decline in revenues resulted in net profits dropping sharply for the quarter. We continue to remain concerned over delays in raising funds which is impacting financial closure of its projects and its revenue growth. We thus discontinue the coverage on the stock and would look at it once company is able to raise funds for financial closure of its pending road and power projects.
- Revenues of the company during Q3FY13 were lower than our estimates and reported a decline of 63% YoY for Q3FY13.
- Operating margins for Q3FY13 were better than our estimates due to higher proportion of high margin projects executed in the quarter. Margins stood at 18% for Q3FY13 as against our estimate of 11%.
- Net profit was thus impacted by decline in revenues and continued high interest outgo. Company didn't pay any tax in the current quarter since it had already paid very high tax during H1FY13.
- We believe that going forward, company's growth would be led mainly by three road projects which are under construction and then from building and mining segment. Phase 2 of the power project is largely over and financial closure of Phase 3 has not been done due to delays in fund raising at the SPV level. There are a lot of delays witnessed in raising funds at the subsidiary level which would have supported further investments in Phase-3 of power project as well as road projects. This has resulted in delaying financial closure of its projects and hence we believe can impact revenue growth adversely going forward. Thus, either growth would be led by sharp increase in debt which would dent the profitability or revenue growth would slow down sharply till adequate fund raising is done at SPV.
- Earnings are expected to drop sharply in FY14 due to low revenue growth. Stock is currently trading at 8.9x and 30.4x earnings for FY13 and FY14 respectively. We discontinue coverage on the stock as we believe that in near term to medium term, fund raising would continue to remain a key overhang on the stock and can impact financial performance adversely.
