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Recommendations India

Sadbhav Engineering 3QFY2014 performance highlights and results update

February 19, 2014, Wednesday, 10:15 GMT | 05:15 EST | 14:45 IST | 17:15 SGT
Contributed by Angel Broking

For 3QFY2014, Sadbhav Engineering (SEL) reported a good set of numbers which were above our estimates. On the back of pick up in execution and betterthan- expected operational performance earnings were of our estimate. SEL has an order book of Rs.9,326cr (4.1x trailing revenues) as of 3QFY2014, which provides good revenue visibility.

Better-than-expected operational performance boosts bottom-line: On the topline front, SEL reported a revenue growth of 75.7% yoy to Rs.621cr in 3QFY2014 against our estimate of Rs.641cr. The revenue growth was mainly on the back of pick up in execution in remaining under construction projects and lower base of last year. On the margin front, the company posted an EBITDAM of 10.4%, up by 104bp yoy and was higher than our estimate of 10.0%. The interest cost grew by 9.3% yoy to Rs.22cr and was lower than our estimate by 21.0%. On the bottom-line front, the company’s PAT reported a growth of 596.4% yoy to Rs.26cr in 3QFY2014 against our estimate of Rs.19cr. This was mainly due to better-thanexpected operational performance and lower base of last year.

Outlook and valuation: The Management expects strong execution to continue since it has already obtained the necessary clearances and has a robust order book. Given the healthy order book (4.1x trailing revenue), we expect the company to report revenues of Rs.2,465cr and Rs.2,827cr for FY2014 and FY2015 respectively. We continue to maintain our Buy view on the stock with a SOTP based target price of Rs.102, owing to robust order backlog of Rs.9,326cr (4.1x trailing revenues), strong balance sheet and on the expectation that the company would be able to meet the equity requirement for its under-construction/development projects through internal accruals or securitisation.