Recommendations » India

Simplex Infra 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, Simplex Infra’s (Simplex) numbers came above our and street’s expectations on the revenue and earnings front and marginally lower at the EBITDAM level. At the end of the quarter, the company’s order book stood at Rs.14,442cr (2.9x FY2011 revenue). Order inflow for the quarter stood at Rs.1,018cr, with the company having L1 orders worth Rs.2,565cr. We are revising our estimates for FY2012 and FY2013 upwards owing to better-than-expected performance during the quarter. We maintain our Buy view on the stock.

Healthy set of numbers: On the top-line front, Simplex reported robust growth of 36.7% yoy to Rs.1,594cr, higher than our estimate of Rs.1,348cr (consensus Rs.1,145cr). This performance was on account of 40% and 15% yoy growth in the domestic and overseas segments, respectively. EBITDAM dipped by 120bp yoy to 8.0% for the quarter, marginally lower than our estimate of 8.6%. Interest cost came in at Rs.55.0cr, reporting a jump of 52.0% yoy/7.6% qoq and in-line with our estimate of Rs.54.3cr. PAT declined by 22.3% yoy to Rs.18.0cr, above our estimate of Rs.13.6cr. Better-than-expected bottom-line performance was due to robust revenue growth during the quarter.

Outlook and valuation: Prior to 2QFY2012, Simplex’s performance was affected by slowdown on the execution front, stretched working capital and subdued order inflow. However, in the past two quarters, Simplex’s performance has improved, with execution and order inflow picking up along with improvement on the working capital front (during 3QFY2012). Hence, we have revised our estimates upwards for FY2012 and FY2013. Our revised target price for the stock is Rs.261 (Rs.233), based on 9x FY2013E earnings, implying an upside of 30.9%. Hence, we recommend Buy on the stock.