Recommendations » India

Consolidated Construction Consortium 3QFY2012 performance highlights and results update

Contributed by Angel Broking

Consolidated Construction Consortium (CCCL) posted a disappointing set of numbers for 3QFY2012, as expected. The company reported a decline in revenue, with continued dismal performance at EBITDAM level, which along with interest cost burden led to loss at the earnings front. We are revising our estimates further downwards for FY2012 to factor in the poor performance on the revenue front during the quarter; however, we are keeping our FY2013 estimates unchanged. We recommend Reduce on the stock.

Decline in revenue, continued abysmal EBITDAM performance -> Loss at earnings level (as expected): On the top-line front, the company posted a 10.0% yoy decline to Rs.446.5cr, lower than our estimate of Rs.535.9cr. On the EBITDAM front, CCCL continued its dismal performance and registered a dip of 510bp yoy to 4.6%, which was higher than our estimate of 3.2%. Interest cost came in at Rs.18.3cr a yoy/qoq jump of 45.1%/6.4%, respectively, and in-line with our estimate of Rs.18.6cr. Owing to poor show at the revenue and margin level, along with interest burden, the bottom line posted a loss of Rs.3.2cr in 3QFY2012 vs. profit of Rs.16.7cr in 3QFY2011 and against our estimate of loss of Rs.5.2cr.

Outlook and valuation: CCCL has been posting erratic numbers on the EBITDAM front and consequently has been performing poorly on the earnings front as well since the past few quarters. However, in 3QFY2012, the company performed badly on the revenue front as well. Further, slow-moving orders (Rs.1,315cr, 22% of order book) and poor EBITDAM performance expected for another 3-4 quarters would result in subdued performance from CCCL going forward as well. Our target price for CCCL is Rs.17/share based on 7.0x on its FY2013E EPS of Rs.2.4, implying a downside of ~11% from current levels; hence, we recommend Reduce on the stock.