ITD Cementation Results Report - Execution-led beat - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities

ITD Cementation (ITD) reported revenue/EBITDA/APAT of INR 9.8/1.1/0.5bn for 4QFY21, 9/10/31% ahead of our estimates as execution outperformed. Margin also recovered to the pre-pandemic level (11.6% vs 11.4% in 4QFY20). Order backlog (OB) is robust at INR 117bn (4.3x FY21 revenue), aided by FY21 order wins of INR 28bn. While lockdown has impacted execution to an extent in April/May-21, ITD has guided for 15-20% topline growth in FY22. We roll forward our valuation to Mar-23 and maintain BUY on ITD with an increased target price of INR 111/sh (INR 106/sh earlier), (1) given large and diversified OB (~4.3x FY21 revenue), (2) strong balance sheet (gross D/E 0.36x) and (3) supportive valuation (7.6x FY23E EPS). We have cut our FY22/23E EPS estimates by 21/4% to account for the impact of the second wave.

Execution led beat: ITDC reported revenue at INR 9.8bn (+33%/+24% YoY/QoQ), 9% ahead of our estimate on better-than-expected execution. EBITDA margin reverted to the pre-pandemic level as EBITDA beat estimates by 10%. Interest cost increased 11% sequentially to INR 380mn. Other income was higher at INR 56mn (INR 8/10mn in 4QFY20/3QFY21) on write-back of provisions. Consequently, APAT came in at INR 525mn (+48%/+75% YoY/QoQ), 31% beat on estimates. Execution was at 85% in April/May-21 on lack of oxygen supply for welding works, complete lockdown in West Bengal, and decrease in workforce due to the second wave of the pandemic. Nevertheless, ITD is targeting 15-20% topline growth in FY22, which we believe is achievable given its large order book. However, margin could contract 1-1.5% on higher commodity prices.

Order book provides visibility for four years: Order inflow during FY21 stood at INR 28bn, taking the OB as on Mar-21 to Rs 117bn (~4x FY21 revenue). Including the INR 9.5bn orders received in 1QFY22 and L1 of INR 3.6bn orders, OB is INR 130bn. ITD has identified INR 880bn infrastructure works and is currently evaluating INR 250bn of projects. Given its qualification across sectors, we believe ITD will be a major beneficiary of the uptick in infrastructure spending.

Balance sheet comfortable: ITD's consolidated gross debt reduced to INR 3.8bn from INR 4.7bn in Mar-20, with D/E at 0.36x. Debt might inch upwards as execution ramps up. ITD expects Capex of INR 800mn in FY22.

Shares of ITD CEMENTATION INDIA LTD. was last trading in BSE at Rs.83.8 as compared to the previous close of Rs. 83. The total number of shares traded during the day was 34534 in over 701 trades.

The stock hit an intraday high of Rs. 84.3 and intraday low of 82.65. The net turnover during the day was Rs. 2880640.

Source : Equity Bulls

Keywords