Recommendations » India

Unity Infraprojects 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Unity Infraprojects (UIP) posted better-than-expected numbers on the revenue and operating fronts, which led to a higher-thanexpected growth in earnings. The company secured orders worth Rs.1,192cr in 9MFY2013, taking the order book to Rs.4,045cr (2.0x trailing revenue) as on date.

Strong quarterly performance: On the top-line front, UIP reported a growth of 12.6% yoy to Rs.551cr, which was ahead of our estimate by 1.1%. UIP reported an EBITDA of Rs.76cr for the quarter, indicating a growth of 7.9% yoy. The EBITDA margin stood at 13.9%, higher than our estimate of 13%, owing to better execution during the quarter. The PAT increased 13.8% yoy to Rs.28cr (ahead of our estimate) while the PAT margin stood at 5.1%, a growth of 6bp yoy. This was mainly due to better-than-expected performance at the operating level. The high interest expense, at 7.7% of revenues, continues to remain a concern.

Outlook and valuation: Going forward, given the current order book mix, we estimate UIP to report a revenue and PAT CAGR of 11.5% and 3.0% respectively over FY2012-2014. The stock is currently trading at a P/E of 2.8x and 2.5x our FY2013 and FY2014 diluted earnings estimates. We have used the SOTP method to value the stock. We value the construction business at a P/E of 3.5x FY2014 estimated earnings (~30% discount to larger companies under coverage) and BOT projects on a DCF basis at a CoE of 16%. We maintain our Buy rating on the stock with a SOTP target price of Rs.58 per share.