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Simplex Infrastructures 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Simplex Infrastructures (Simplex) reported slow execution and lower profitability in 3QFY2013 due to stagnant order book and delayed payments from clients. The company has an order book of Rs.15,064cr (2.5x trailing revenue) as of 3QFY2013. It secured orders worth Rs.1,239cr and Rs.4,254cr in 3QFY2013 and 9MFY2013 respectively.

Slower execution, margins ahead of our estimates: On the top-line front, the company reported a decline of 13.9% yoy to Rs.1,352cr, which was 24.7% and 21% lower than our and consensus estimate. Revenue contribution from domestic and overseas operations stood at 85% and 15%, respectively, for 9MFY2013. On the operating front, the company reported an EBITDA of Rs.129cr, a growth of 8.9% qoq in 3QFY2013. Adjusting for the foreign exchange MTM loss of Rs.0.6cr, the EBITDA margin stood at 9.6% and was higher than our estimate of 8.7%. The company reported an adjusted PAT of Rs.12cr (was below our estimate of Rs.28cr) in 3QFY2013, a decline of 43.8% yoy. This was mainly due to lower-than-expected revenue growth during the quarter.

Outlook and valuation: Simplex has been performing well on the revenue front since the last four consecutive quarters and has a strong order book of Rs.15,064cr (2.5x trailing revenue). However the Management has earlier given a guidance of 10-15% on the revenue front for FY2013 owing to the macro challenges faced by the sector. Going forward, given the current order book mix, we estimate Simplex to report a revenue and PAT CAGR of 9% and 21% respectively over FY2012-14. We maintain our Buy rating on the stock, with a target price of Rs.197 per share, valuing the company at 8x FY2014E earnings.