Patel Engineering Result Updated
Patel Engineering Result Updated
Patel Engineering Result Updated
February 1, 2012
Patel Engineering
Performance Highlights
Y/E March (` cr) Net sales Operating profit Net profit after MI 3QFY12 619.3 111.3 20.0 3QFY11 434.6 58.0 9.8 2QFY12 948.5 111.5 30.1 % chg (yoy) 42.5 91.7 104.8 % chg (qoq) (34.7) (0.2) (33.5)
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Infrastructure 750 1.6 240/73 183,470 1 17,301 5,236 PENG.BO PEC@IN
`108 -
For 3QFY2012, Patel Engineerings (PEL) numbers came in above ours and streets estimates. The company posted strong revenue growth during the quarter, mainly on account of its international subsidiaries. However, we are not revising our numbers on the basis of this quarters performance, as we believe recovery to the growth path for PEL will take time as order inflow concerns loom large and as the current order book is plagued with delays/deferrals. Also, the company is yet to provide for the hedging loss incurred due to project cancellations, which we believe would materialize and impact the companys financials in future. Hence, we maintain our negative stance on the company and a Neutral rating on the stock. Numbers surprise positively due to lower depreciation and interest cost: For 3QFY2012, on a consolidated basis, PEL posted net sales growth of 42.5% yoy primarily due to good performance of its international subsidiaries. EBITDA margin came as a surprise at 18.0%, as international subsidiaries reported superlative margins of 19.5%. Therefore, reported PAT for the quarter grew by 104.8% yoy, despite a 63.4% yoy/14.1% qoq increase in interest cost. Outlook and valuation: PELs core C&EPC business is currently facing headwinds with its large projects facing delays and a disappointing order inflow. Further, the longer gestation nature of its order book, macro headwinds and increasing debt levels put the companys growth visibility for the next few quarters under doubt. Hence, we maintain our Neutral view with a fair value of `106/share. Key risks to our recommendation are: 1) pick-up in order inflow from the power segment in the near term; 2) earlier-than-expected execution from the companys slow-moving orders; and 3) raising of capital and the resultant decline in debt levels.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 45.6 11.7 6.6 36.1
3m (1.0)
1yr (4.0)
10.8 (53.4)
FY2010 3,191 29.7 198 42.4 28.4 15.9 3.8 16.7 12.5 0.6 0.8 5.2
FY2011 3,476 8.9 123 (38.1) 17.6 14.3 6.2 8.8 10.5 0.5 1.0 6.7
FY2012E 3,573 2.8 104 (15.3) 14.9 13.4 7.3 7.0 9.0 0.5 0.9 6.9
FY2013E 3,609 1.0 103 (0.7) 14.8 13.1 7.3 6.6 8.2 0.5 1.0 7.6
Shailesh Kanani
022-39357800 Ext: 6829 [email protected]
Nitin Arora
022-39357800 Ext: 6842 [email protected]
3QFY12 619.3 508.1 111.3 18.0 59.2 20.5 2.4 33.9 12.2 21.7 3.5 1.7 20.0 3.2 2.9
3QFY11 434.6 376.6 58.0 13.4 36.2 18.6 7.1 1.0 11.3 2.7 8.6 2.0 (1.1) 9.8 2.3 1.4
2QFY12 948.5 837.0 111.5 11.8 51.9 15.1 2.5 47.1 15.9 31.1 3.3 1.0 30.1 3.2 4.3
% Chg (yoy) 42.5 34.9 91.7 460bp 63.4 10.5 200.2 361.9 150.6 150bp 104.8 104.8
% Chg (qoq) (34.7) (39.3) (0.2) 620bp 14.1 35.8 (5.1) (27.9) (23.2) (30.4) 20bp (33.5) (33.5)
9MFY12 2,324.2 1,983.9 340.3 14.6 174.5 61.9 7.2 111.1 39.2 72.0 3.1 5.9 66.0 2.8 9.5
9MFY11 1,902.8 1,610.2 292.6 15.4 98.7 70.4 14.8 1.0 139.4 41.2 98.2 5.2 4.7 93.4 4.9 13.4
% Chg 22.1 23.2 16.3 (80)bp 76.8 (12.2) (51.8) (20.3) (4.8) (26.7) (210)bp (29.4) (29.4)
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
February 1, 2012
3QFY12
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
February 1, 2012
3QFY12
Methodology NAV/BV BV BV
Remarks ` cr `/share % to TP 54.7 16.7 15.7 19.3 108.0 (1.5) 51.4 15.7 14.7 18.2 100.0 50% Discount 117 1.0x P/BV 109 0.5x P/BV 135
743 106.4
14.9 14.8
Investment Arguments
Structural issues on the business front: PEL's core E&C business is currently facing strong headwinds, with its large projects facing delays and drying of order inflow for the last many quarters. Further, the longer gestation nature of its order book and increasing debt levels put the company's growth visibility for the next few quarters under doubt. Further, there is no clarity on the execution schedule of its 1,050MW thermal power project owing to pending clearances. Valuations: Given the sharp fall in the stock price in the past 12 months, PEL's valuations have come down drastically vindicating our negative stance on the stock. However, we are concerned about the growth prospects of the company and believe that it is facing structural issues, which will take time to be sorted out. Further, there are better plays available in the infrastructure space than PEL. Hence, we maintain our Neutral view on the stock. Key risks to our recommendation: 1) Pick-up in order inflow from the power segment in the near term; 2) earlier-than-expected execution from its slow-moving orders; and 3) raising of capital and the resultant decline in debt levels.
February 1, 2012
Buy 13,832 13,763 16,017 Buy 43,905 53,779 60,258 Buy 1,816 5,074 3,476 7,850 2,209 4,889 1,952 5,095 3,271 2,602 5,562 2,503 5,749 3,586 2,585 6,485
1,345 1,608
9,585 10,592
February 1, 2012
February 1, 2012
February 1, 2012
February 1, 2012
Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Order Book to Sales Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROACE (Pre-tax) Angel ROIC (Pre-tax) ROAE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage 1.1 3.0 3.9 1.4 3.7 2.0 1.4 3.7 2.1 1.8 5.2 1.5 1.8 5.8 1.2 1.9 6.4 1.1 3.8 125 75 100 176 3.5 144 77 99 221 3.8 167 73 95 251 3.7 202 82 110 296 3.4 221 96 126 323 3.1 231 107 150 328 14.2 16.2 19.5 11.0 12.5 14.9 12.5 13.7 16.7 10.5 11.2 8.8 9.0 9.4 7.0 8.2 8.4 6.6 12.7 0.9 1.3 14.4 6.4 0.8 21.1 11.0 0.8 1.1 10.2 7.6 1.3 13.5 12.5 0.7 1.1 9.5 6.9 1.4 13.2 11.9 0.8 0.9 8.4 8.7 1.6 8.1 11.1 0.7 0.8 6.3 7.8 1.8 3.6 10.6 0.7 0.8 5.9 7.8 1.9 2.3 30.5 21.7 30.7 1.5 121.1 30.2 19.9 37.0 1.7 145.7 30.2 28.4 44.0 2.0 195.2 22.6 17.6 29.3 1.0 204.5 14.9 14.9 26.6 1.1 218.1 14.8 14.8 27.7 1.2 231.5 5.0 3.5 0.9 1.4 0.9 5.6 0.8 3.1 5.4 2.9 0.7 1.6 0.9 5.7 0.8 2.9 3.8 2.5 0.6 1.9 0.8 5.2 0.7 3.1 6.2 3.7 0.5 0.9 1.0 6.7 0.8 2.7 7.3 4.1 0.5 1.0 1.0 7.4 0.8 2.1 7.3 3.9 0.5 1.1 1.0 8.0 0.8 2.2 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
February 1, 2012
E-mail: [email protected]
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Patel Engg. No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns):
February 1, 2012
10