Simplex Infrastructures - Result Update 1QFY2014 - Angel Broking

For 1QFY2014, Simplex Infrastructures (SINF) reported a mixed set of numbers which were above our estimates on the profitability front. SINF reported slow execution due to stagnant order book and delayed payments from clients; however owing to stellar operational performance earnings were above our estimate.

Slower execution offset by higher-than-expected operational performance: On the top-line front, the company reported a decline of 12.0% yoy to Rs. 1,395cr in 1QFY2014, which was 7.8% lower than our estimate. Revenue contribution from domestic and overseas operations stood at 85% and 15%, respectively, for 1QFY2014. On the operating front, the company reported an EBITDA decline of 1.6% yoy to Rs. 151cr in 1QFY2014. Adjusting for the foreign exchange MTM loss of Rs. 3cr, the EBITDA margin stood at 10.8% and was higher than our estimate of 9.4%. The company reported an adjusted PAT of Rs. 16cr in 1QFY2014, a decline of 43.1% yoy which is above our estimate of Rs. 14cr. This was mainly owing to the stellar operational performance during the quarter. However, the high interest expense at 5.8% of revenues continues to remain a concern.

Outlook and valuation: Simplex has not been performing well on the revenue front since the last six-seven consecutive quarters due to slow moving orders and delays in payments from clients. The company has a strong order book (Rs. 15,843cr; 2.8x trailing revenue) and we expect execution to pick up in 2HFY2014. Considering the current order book mix, we estimate revenue and PAT CAGR of 8.2% and 13.6% respectively over FY2013-15E. Given the recent fall in the stock price, we continue to maintain our Buy rating on the stock, with a target price of Rs. 56, valuing the company at 4x FY2015E earnings.

Source : Equity Bulls

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