Sadbhav Engineering - 4QFY2013 Result Update - Angel Broking

Sadbhav Engineering (SEL) reported a mix set of numbers for 4QFY2013. While revenues were better than expected; however, owing to abysmal operational performance, the earnings were in-line with our estimate. SEL has an order book of Rs. 10,143cr (5.6x tailing revenues) as of 4QFY2013, which provides good revenue visibility.

Execution momentum picks up: On the top-line front, SEL reported a revenue of Rs. 702cr for 4QFY2013, a decline of 22.4% yoy, but significantly higher than our estimate of Rs. 456cr. This was mainly on account of pick up in the pace of execution in the remaining under-construction projects (mainly Chhindwara project, which contributed ~Rs. 200cr). On the margin front, the EBITDAM came in at 7.4%, a dip of 207bp yoy and was lower than our estimate of 10.4%. The interest cost grew by 94.1% yoy/42.8% qoq to Rs. 29cr, and was above our estimate. On the bottom-line front, the company reported a PAT of Rs. 12cr (in-line with our estimate of Rs. 12cr) for the quarter, indicating a decline of 75.4% yoy. This was mainly due to an abysmal operational performance and higher interest expense during the quarter.

Outlook and valuation: The Management has given a revenue guidance of Rs. 2,500cr for FY2014. It expects the recently won BOT projects–Gomti-ka-Chauraha, Solapur-Bijapur and Rajsamand-Bhilwara to contribute revenue during the year. Given the healthy order book (5.6x trailing revenue), we expect the company to report revenues of Rs. 2,462cr and Rs. 2,731cr for FY2014 and FY2015 respectively. We continue to maintain our Buy view on the stock with a SOTP based target price of Rs. 139, owing to robust order backlog of Rs. 10,143cr (5.6x trailing revenues), strong balance sheet and on the expectation that the company would be able to meet the equity requirement for its underconstruction/development projects through internal accruals or securitisation.

Source : Equity Bulls

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