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Recommendations India

Simplex Infrastructures 3QFY2014 performance highlights and results update

February 18, 2014, Tuesday, 11:06 GMT | 06:06 EST | 15:36 IST | 18:06 SGT
Contributed by Angel Broking

For 3QFY2014, Simplex Infrastructures (SINF) reported a poor set of numbers which were below our estimates. SINF’s top-line performance was below our estimate on account of slow execution (due to slow moving order book) and delayed payments from clients; while earnings were below our estimate owing to lower than expected revenue performance and high interest.

Slow execution & higher interest drags down profitability: On the top-line front, the company reported revenues of Rs.1,392cr, registering a growth of 3.0% yoy, which is 7.0% lower than our estimate. The revenue contribution from the domestic and overseas operations stood at 87% and 13%, respectively, for 3QFY2014. EBITDAM came in at 10.5% showing an improvement of 86bp on a yoy basis and was above our estimate of 10.0%. Interest cost grew by 16.9% yoy to Rs.86cr for the quarter. The company reported an adjusted PAT of Rs.15cr for the quarter, a growth of 26.4% yoy, which is below our estimate of Rs.18cr. This is mainly owing to lower-than-expected revenue performance and high interest cost during the quarter.

Outlook and valuation: Simplex has not been performing well on the revenue front since the last six consecutive quarters due to slow moving orders and delays in payments from clients. The company has a strong order book (Rs.16,708cr; 3.0x trailing revenue) and we expect execution to pick up from FY2015. Considering the current order book mix, we estimate revenue and PAT CAGR of 4.7% and 33.3% respectively over FY2013-15E. However, due to recent increase in stock price, we recommend a Neutral rating on the stock.