Recommendations » India

Punj Lloyd 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Punj Lloyd (Punj) posted a mixed set of numbers. The performance at the revenue fronts was subdued, however higher share of profits from associates led to profitability at the earnings level. The company has secured orders worth Rs.1,300cr in 3QFY2013, taking its order backlog to Rs.23,690cr (2.0x FY2013 revenue). However, we maintain our Neutral view on the stock on account of various overhangs – uncertainty over receivable claims, stretched working capital and increasing leverage on the balance sheet.

Profit from associates led to profitability: The company reported a subdued topline growth of 2.6% yoy to Rs.2,881cr. The EBITDAM for the quarter stood at 10.1%, showing an improvement of 427bp on a yoy basis. Interest cost came in at Rs.198cr, a jump of 22.2% on a yoy basis, but a fall of 4.7% on a sequential basis. Depreciation for the quarter was flat at Rs.88cr. On the bottom-line front, the company reported a PAT of Rs.9cr vs. Rs.70cr in 3QFY2012; that too owing to profits from its associates (which reported a profit of Rs.8cr vs a loss of Rs.5cr in 3QFY2012) and healthy performance at the operating level.

Outlook and valuation: Based on its 9MFY2013 performance, we are revising our EPS estimates for FY2013 and FY2014 to Rs.(0.4) and Rs.3 respectively. Punj has been looking to reduce its debt through sale of its non-core assets and replacing Indian debt with foreign debt. However, given the difficult environment we believe these steps would not yield results before the next six to nine months. Further, there is no clarity on the time-frame of recovering various outstanding claims as legal issues such as litigation and arbitration usually are lengthy processes. We continue to remain Neutral on the stock due to headwinds faced by the company as mentioned above.