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Research
Accumualte Simplex Infrastructures - Visibility improvement on the cards - Elara Capital
Posted On : 2010-08-17 20:03:52( TIMEZONE : IST )
- Simplex Infrastructures
- Rating : Accumulate
- Target Price : INR531
- Upside : 11%
- CMP : INR478 (as on 13 August 2010)
Results in line, maintains 15-20% yearly growth guidance
SIL reported a meager 6% rise in revenues YoY to ~INR11.8bn as the contribution from overseas projects declined for the second consecutive quarter, this time by a whooping ~44% to INR1.9bn. Operating margins though expanded marginally by 13bps YoY, helped mainly by lower commodity prices. Consequently, operating profits rose by 7.4% YoY to ~INR1.2bn. A better operational performance coupled with a 19% YoY decline in interest costs (borrowing cost for Q1FY10 @6.4%) led to a 41.1% YoY rise in net profits to INR362mn.
Order backlog improves further, bags fresh jobs worth INR18.6bn
The order backlog as of June 2010 stood at ~INR123bn (2.3x FY11E revenues) excluding the potential EPC work related to the in-house road BOT project estimated at INR9.2-9.5bn (for 74% share). The company has a bid pipeline for works worth INR395bn (including overseas bids) clarity on which should emerge in subsequent quarters. With the private sector capex gaining momentum, we expect SIL to further add jobs worth INR65.8bn in the remaining quarters of the fiscal and assume a muted growth in fresh inflows over the period FY11-13.
Upgrade to Accumulate with a revised TP of INR531
Despite a consecutive quarterly falter on execution front on the overseas contracts coupled with a paltry growth in domestic revenues, we are positive on SIL's fresh order inflows since Q4FY10 which seem to have picked up lately. The same explains the management's confidence in maintaining the yearly growth guidance of 15-20%, aided by an execution push lend by the newly bagged projects contributing to revenues in H2FY11.
We maintain our earnings estimates but revise our target price upwards to INR531 post incorporating the contributions from the overseas subsidiaries and the newly bagged Bhubaneshwar Chandikol road BOT project. Upgrade to Accumulate.
