Result update of ARSS Infrastructure Projects - Sunidhi Securities

Revenue up 59%, PAT up 80% YoY

ARSS has reported excellent results with strong margins, which are in line with our estimates. Revenue for Q1FY11 stood at Rs 3564.8 mn, up by 59% YoY, while EBIDTA was Rs 680.8 mn, up by 82% YoY. It has registered 80.15 per cent jump in its net profit at Rs 340.5 mn as against Rs 189 mn achieved in the corresponding period of the previous fiscal. On QoQ basis, revenue fell by 11% in Q1FY11 compared to Q4FY10 as March quarter is normally the best quarter for construction companies.

Order book at Rs. ~35 bn, 3.5x of FY10 revenues

ARSS has robust order book of Rs.35 bn as on 30th Jun 2010, which will be executed in 18-24 moths. The current order book is 3.5x of FY10 revenues and provide revenue visibility for FY11E and FY12E.

Dominant player in East, EBIDTA Margins rise to 19.1%

The company is in dominant position in East India i.e. Orissa, Chhattisgarh & Jharkhand state with large market share in railway/road projects. The company has maintained EBIDTA margins of ~18% in past due to captive raw material with own crusher plants and stone mines on lease, tight cost controls and management efficiency. EBIDTA margin for Q1FY11 stood at 19.1% compared to 16.6% YoY due to increased share of railway work in the revenue mix. We believe that company will be able to achieve EBIDTA margins of 18.3% for FY11E while we estimate a 50 bps decline in EBIDTA margin for FY12E to 17.8%

Own large crusher plants and equipments

ARSS has large crusher plants at 13 locations. all the Crusher plant are available with the adequate quarry and necessary equipments are mobilized to use all the crusher plants to the full capacity. Stone quarrying and crushing is undertaken to produce required sizes of rock products, be it for railway track ballast, highway work or other civil work. ARSS also has fleet of strategic construction equipment assets, which enables it to rapidly mobilize equipments to project sites.

Strong revenue & profit growth

The company's revenue has grown at a CAGR of 79% from Rs. 3,136 mn in FY08 to Rs. 10,065 mn in FY10. Similarly, PAT has grown at a CAGR of 84% from Rs. 268 mn in FY08 to Rs. 901 mn in FY10.

Valuations & Recommendation

Since our Initiating coverage note with 'Buy' rating dated 3-Jun-10 at price of Rs 1066, ARSS has delivered 13% return. At cmp of Rs. 1208, ARSS is trading at P/E multiple of 10.9x of its FY11E and 7.7x on FY12E EPS of Rs.107.2 and Rs.152.6 respectively. We rate ARSS as 'Accumulate' with Price target of Rs. 1373 on P/E multiple of 9x on FY12E EPS of Rs. 152.6

Source : Equity Bulls

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