Hold Consolidated Construction Consortium Ltd - PINC Result Review

CCCL's topline grew by 23.4% YoY to Rs5.1bn, in line with street estimates; operating margins improved by 93bps to 8.3% YoY, as material costs softened. Interest cost during the quarter rose by 190.7% to Rs105mn. PAT increased by 6.6% YoY to Rs188mn.

Robust order booking during the quarter

Order book during the quarter increased by 33.5% QoQ to Rs45.3bn, i.e a total inflow of Rs17.1bn, which includes orders from Goa Airport Rs2bn, Power (Ind Bharat Rs5.3bn and Meenakshi Group Rs3.4bn) and Metro rail Rs2.3bn.

Higher working capital requirement dents profit

Despite better operating margins, the net margin declined by ~60bps to 3.7%, due to surge in interest cost by 190% YoY to Rs105mn, as the working capital requirement increased due to execution of high value projects and also some delay in payments from few clients.

JV with Edac Energy

The company has formed a JV with Edac Energy for execution of power project order from Meenakshi group, the order is a BoP order, where CCCL will execute the civil portion whereas Edac will handle the BoP part. The company has also incorporated a subsidiary named CCCL Power Infrastructure Services to cater to future BoP projects.

VALUATIONS & RECOMMENDATION

At CMP of Rs87, the stock trades at 13.6x our FY11E EPS of Rs6. We have valued the stock at 12x FY11E earnings and thus arrive at a target price of Rs79. We maintain our 'HOLD' recommendation on the stock.

Source : Equity Bulls

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