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Punj Lloyd 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, Punj Lloyd (Punj) posted a mixed set of numbers with decent performance on the revenue front; however, the company reported dismal performance on the margin front and its earnings came in black on account of higher other income (mainly foreign exchange gains), barring which it suffered losses. Punj has received orders worth Rs.12,364cr (commendable job in a gloomy environment) during 9MFY2012 against Rs.9,978cr in FY2011, taking its order backlog to Rs.28,270cr (3.6x FY2011 revenue). However, we maintain our Neutral view on the stock on account of various overhangs – uncertainty over receivable claims, stretched working capital, increasing leverage on the balance sheet and auditor qualifications.

Mixed performance: For 3QFY2012, Punj posted 27.5% yoy top-line growth to Rs.2,701cr. The company’s EBITDA margin for the quarter stood at 0.5% in 3QFY2012 against 4.5% in 3QFY2011, registering a dip of 400bp yoy/790bp qoq. Interest and depreciation cost came in at Rs.137.2cr and Rs.89.2cr, respectively. However, on account of other income of Rs.319.5cr, Punj reported profit of Rs.70.3cr, against a loss of Rs.62.1cr in 3QFY2011.

Outlook and valuation: As compared to the previous quarters, Punj performed better in 3QFY2012; also, a few positives (such as healthy order booking and reduction in auditor qualification) emerged during the quarter. However, owing to the erratic performance posted by the company in the past, continuance of 3QFY2012 performance remains in doubt. We have valued Punj on 0.75x P/BV (FY2013) and have arrived at a fair value of Rs.71. Although our fair value offers an upside of 16.0% from current levels, we continue to remain Neutral on the stock due to headwinds faced by the company (mentioned above).