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7/29/2019 IDirect_SimplexInfra_Q3FY13=20-2-13
1/8
February 19, 2013
ICICI Securities Ltd|Retail Equity Research
Result Update
WHATS CHANGED
PRICE TARGET ....................................................................... Changed from | 262 to | 228
EPS (FY13E) ......................................................................... Changed from | 17.1 to | 11.9
EPS (FY14E) ......................................................................... Changed from | 23.9 to | 15.3
RATING............................................................................................................... Unchanged
Execution improvement expected in H2FY14Simplex Infrastructure (SIL) reported dismal Q3FY13 results led bysubdued execution on account of liquidity crunch from the client side.Furthermore, WC deteriorated further to 155 days while debt levelincreased further to | 2670 crore in Q3FY13. The business environmentremains challenging. However, we maintain BUY on the stock with anSOTP based target price of | 228 on account of its strong well diversifiedorder book, relatively better quality of management and executioncapabilities that make it a strong candidate for re-rating in multiples whenthe macro environment improves.Stretched working capital leads to poor executionNet sales declined ~15.3% YoY to | 1351.6 crore vs. our estimate of
| 1722.8 crore mainly due to slower execution led by stretched working
capital. The EBITDA margin, however, at 9.6% was ahead of our estimate
of 9.1%. The bottomline, consequently, was lower at | 10.8 crore vs. our
estimate of | 23.3 crore due to lower topline. The working capital
deteriorated further to 155 days in Q3FY13 vs. 140 days in Q2FY13. As a
result, the debt increased further to | 2670 crore in Q3FY13 vs. | 2542
crore in Q2FY13. On the positive side, it has seen a marginalimprovement in WC at 150 days and marginal reduction of ~| 30-35 crore
in debt in January, 2013.
Order book healthy, residential building division moving slowThe order book stood at | 15,064 crore implying 2.5x order book to bill
(on a TTM basis). Additionally, it has L1 orders worth | 1900 crore. The
company has indicated that the residential building segment of the order
book (~23% of the order book) continues to move slowly due to the
financial crunch of clients. The company also lowered its topline guidance
to 5-10% for FY13 vs. 10-15% earlier. SIL indicated that execution should
improve in H2Y14E with interest rate softening and working capital
improvement.
Quality order book, execution capabilities to tide over tough timesStretched working capital could lead to muted execution for the next
couple of quarters. However, we remain positive on SIL given its strong
well diversified order book, relatively better quality of management and
execution capabilities that make it a strong candidate for re-rating in
multiples when the macro environment improves. We maintain our BUYrecommendation on the stock with an SOTP target price of | 228. Rising
leverage levels remain a key risk to our call.
Exhibit 1:Financial Performance| crore Q3FY13 Q3FY13E Q3FY12 Q2FY13 YoY Gr (%) QoQ Gr (%)
Net sales 1351.6 1722.8 1596.4 1397.6 -15.3 -3.3
EBITDA 129.2 157.2 129.4 118.3 -0.2 9.2
EBITDA Margin (%) 9.6 9.1 8.1 8.5 145bps 109bps
Depreciation 50.6 52.1 48.7 49.5 3.9 2.1
Interest 73.9 73.8 55.0 69.3 34.3 6.7
Reported PAT 10.8 23.3 18.0 11.0 -40.2 -1.8 Source: Company, ICICIdirect.com Research
Simplex Infrastructure (SIMCON)
| 166
ting matrix
ing : Buy
get : | 228
get Period : 12-15 months
ential Upside : 38%
y Financials
crore FY11 FY12 FY13E FY14E
t sales 4691.2 5897.6 6059.2 6787.5
ITDA 478.2 527.7 545.3 621.7
j. Net profit 123.2 89.2 59.2 75.9
luation summary
FY11 FY12 FY13E FY14E
S (|) 24.8 18.0 11.9 15.3
(x) 6.7 9.2 13.9 10.8
rget PE(x) 9.2 12.7 19.1 14.9
/EBITDA(x) 5.0 5.5 6.2 5.7
BV(x) 0.8 0.7 0.7 0.6
NW(%) 12.0 7.8 5.1 5.8
CE(%) 12.7 11.4 9.5 10.3
ock data
cap | 822 crore
bt | 2,670 crore
sh & Invst | 50 crore
| 3,442 crore
week H/L (Rs) 264/160
uity cap | 10 crore
ce Value | 2.0
Holding (%) 21.0
Holding (%) 11.8
ce movement
100
150
200
250
300
350
Feb-13Nov-12Aug-12May-12Mar-12
2,600
3,250
3,900
4,550
5,200
5,850
6,500
Price (R.H.S) Nifty (L.H.S)
alysts name
eepak Purswani, CFA
eepak.purswani@icicisecurities.com
hupendra Tiwary
hupendra.tiwary@icicisecurities.com
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Q3FY13 performance stretched working capital leads to poor execution
Net sales declined ~15.3% YoY to | 1351.6 crore vs. our estimate of| 1722.8 crore mainly due slower execution during the quarter on
account of the stretched working capital of the company.
Exhibit 2:Revenue composition - vertical wise (Q3FY13)Piling
7%Industrial
11%
Building & Housing
18%
Power
32%
Marine
1%
Roads & Railways
8%
Bridges
13%
Urban Infrastructure
10%
Source: Company, ICICIdirect.com Research
The EBITDA margin, however, at 9.6% was ahead of our estimate of9.1%
The bottomline, consequently, was lower at | 10.8 crore vs. ourestimate of | 23.3 crore due to lower topline
On the negative side, the working capital deteriorated further to 155days in Q3FY13 vs. 140 days in Q2FY13. As a result, the debt
increased further to | 2670 crore in Q3FY13 vs. | 2542 crore in
Q2FY13
Exhibit 3:Deteriorating working capital remains a concern
103
125130 132
137
60
90
120
150
FY10 FY11 FY12 Q1FY13 Q2FY13
Working Capital Days (ex- cash)
Source: Company, ICICIdirect.com Research
Robust order book at | 15,064 crore, 2.5x order book to bill ratio
The order book stood at | 15,064 crore implying 2.5x order book tobill (on a TTM basis). Additionally, it has L1 orders worth | 1900
crore
SIL has seen an order inflow of | 1239 crore in Q3FY13 largely drivenby the power vertical (32% of inflows) and buildings vertical (18% of
the inflows))
The company also informed that it has received orders worth | 1400crore in the first 1.5 months of Q4FY13, which takes the total order
inflows in FY13 YTD to ~| 5600 crore
Maximum revenue contribution (~32%) came from the
power segment in Q3FY13
The working capital deteriorated further to 155 days in
Q3FY13 vs. 140 days in Q2FY13. As a result, the debt
increased further to | 2670 crore in Q3FY13 vs. | 2542
crore in Q2FY13
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Exhibit 4:Trend in order book & order book to bill ratio
15,03414,440
15,22415,508
15,203 15,064
2.92.8
2.62.5
2.42.5
8000
10000
12000
14000
16000
Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13
|
crore
2.0
2.3
2.5
2.8
3.0
3.3
3.5
(x)
Orderbook (LHS) Orderbook to bill ratio (RHS)
Source: Company, ICICIdirect.com Research
Exhibit 5:Order book break up
5 4 4 4 3 3
26 26 25 23 25 24
2 2 2 1 1 1
14 14 11 10 9 7
17 19 21 29 26 28
10 9 8 8 10 9
24 27 29 25 26 28
0
20
40
60
80
100
Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13
(%)
Piling & Grd eng Power Marine
Industrial Roads, Railways & Bridges Urban Utilities
Bldg & Housing
Source: Company, ICICIdirect.com Research
Exhibit 6:Geography wise order book break-up
Domestic
92%
Overseas
8%
Source: Company, ICICIdirect.com Research
Exhibit 7:Clientele wise order book break-up
27%
54%
19%
Government Private PPP
Source: Company, ICICIdirect.com Research
The order book stood at | 15,064 crore, 2.5x order book to
bill (on a TTM basis)
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BOT update
The equity commitment for the Bhubaneswar Chandikol project hasbeen made and the company has also received ~ 25% of grant i.e.
| 51 crore. In terms of construction, it has completed 46% of the
work. The toll/day is currently | 21 lakh
SIL indicated that it would require equity infusion for | 116 crore inFY14 for the new BOT project. It has so far made | 8.5 crore equity
investment in the Kharagpur project and | 9.9 crore in the Vijayawada
project. The financial closure for all projects has been done
Exhibit 8:BOT project detailsSIL's stake
(%)
Project Cost
(| crore)
Debt
(| crore)
Equity
(| crore)
Grant/ (Prem.)
| crore
SIL's Equity
(| crore)
Invested till date
(| crore)
FY14 SIL Equity
requirement Remarks
Bhubaneshwar - Chandikol 35 1411 1058 149 204 52 52 -46% construction completed, tolling
started - collects | 21 lac/day
Mahulia Kharagpur 51 1159 867 163 126 80 9 33FC done, awaiting right of way &
other clearances to begin constr.
Vijayawada Gundugolanu 49 2088 1670 419 -58 205 10 70 FC done, awaiting right of way &other clearances to begin constr.
Jowai Meghalaya 100 326 136 65 125 65 - 13 FC done Source: Company, ICICIdirect.com Research
Change in estimates
We now build in slower execution in FY13 and FY14E as guided by the
management due to stretched working capital and, consequently,
downgrade our earnings estimates by ~30% and ~36% for FY13E and
FY14, respectively.
Exhibit 9:Revision in earning estimatesParticulars
Old New % Change Old New % Change
Net Sales 6,625.9 6059.2 (8.6) 7,649.7 6787.5 (11.3)
EBITDA 596.3 545.3 (8.5) 700.7 621.7 (11.3)
EBITDA Margin 9.0 9.0 0 bps 9.2 9.2 0 bps
PAT 84.9 59.2 (30.3) 118.5 75.9 (36.0)
EPS 17.1 11.9 (30.3) 23.9 15.3 (36.0)
FY13E FY14E
Source: Company, ICICIdirect.com Research
Exhibit 10:Key Assumptions| crore FY12 FY13E FY14E
Order inflow 6446 6645 6627
Order Backlog 15224 15819 15659Execution - Average (%) 39.2 39.0 43.1
Source: Company, ICICIdirect.com Research
Valuation
Stretched working capital could lead to muted execution for the next
couple of quarters. However, we remain positive on SIL given its strong
well diversified order book, relatively lower equity commitment towards
subsidiary and execution capabilities that make it a strong candidate for
re-rating in multiples when the macro environment improves. We
maintain our BUY recommendation on the stock with an SOTP targetprice of | 228/share. Rising leverage levels remain a key risk to our call.
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Exhibit 11:SOTP valuation tableEntity
Value
(| crore)Per share (|) Comment
Construction business 3,730 751 6x FY14 EV/EBITDA
Oil rig business 29.0 6 DCF based valuation
BOT road project valuation 70 14 at 1x P/BV
Less: Net debt (2,699) (544) FY14 Net Debt
Fair value 1,130 228
Source: Company, ICICIdirect.com Research
We have valued SIL based on our SOTP based price target
of | 228/share
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ICICI Securities Ltd|Retail Equity Research Page 6
Financial summary
Profit and loss statement
(| Crore) FY11 FY12 FY13E FY14E
Net Sales 4,691.2 5,897.6 6,059.2 6,787.5
Growth (%) 5.6 25.7 2.7 12.0Op.Expenditure 4,213.1 5,369.9 5,513.9 6,165.8
EBITDA 478.2 527.7 545.3 621.7
Growth (%) 10.2 10.4 3.3 14.0
Other income 22.7 19.2 44.0 27.1
Depreciation 160.8 183.3 201.6 207.4
EBIT 340.0 363.6 387.8 441.5
Interest 144.5 230.3 291.4 328.2
PBT 195.5 133.3 96.4 113.3
Tax 72.2 44.1 33.4 37.4
Extraordinary item 0.0 0.0 0.0 0.0
Rep. PAT before MI 123.2 89.2 63.0 75.9
MI 0.0 0.0 0.0 0.0
Rep. PAT after MI 123.2 89.2 63.0 75.9
Adjustment 0.0 0.0 3.8 0.0
Adj. Net Profit 123.2 89.2 59.2 75.9
Growth (%) 0.5 -27.6 -33.6 28.2
EPS (|) 24.8 18.0 11.9 15.3
Source: Company, ICICIdirect.com Research
Cash flow statement
(| Crore) FY11 FY12 FY13E FY14E
Net Profit before tax 195.5 133.3 96.4 113.3
Depreciation & Amortisation 160.8 183.3 201.6 207.4Others 105.2 219.2 274.1 301.0
Direct tax paid -72.2 12.3 -33.4 -37.4
CF before change in WC 389.3 548.1 538.7 584.3
Inc/Dec in Trade Recv. -498.9 612.9 -116.8 -176.8
Inc/Dec in Inventories -61.3 -147.7 -63.4 -52.2
Inc/Dec in Loans & Adv -86.5 -136.9 -156.8 -45.1
Inc/Dec in other current assets -43.1 -1,471.0 -1.7 -245.3
Inc/Dec in cur liabilities 337.0 653.6 -129.2 298.9
CF from operations 36.5 59.1 70.9 363.8
Purchase of Fixed Assets -234.3 -308.7 -200.0 -200.0
(Inc)/Dec in investments 1.2 -29.1 -32.7 7.1
CF from investing -233.2 -337.7 -232.7 -192.9
Inc/(Dec) in Debt 209.2 245.3 208.6 -178.2
Inc/(Dec) in Net worth -11.5 -11.5 0.0 0.0
CF from Financing 197.7 233.8 208.6 -178.2
Net Inc/Dec in cash & eq. 1.1 -44.8 46.8 -7.2
Opening cash balance 87.3 78.5 42.8 89.5
Closing cash balance 78.5 42.8 89.5 82.3
Source: Company, ICICIdirect.com Research
Balance Sheet
(| Crore) FY11 FY12 FY13E FY14E
Liabilities
Equity capital 9.9 9.9 9.9 9.9
Reserves & Surplus 1,067.8 1,191.6 1,254.6 1,330.5
Shareholder's fund 1,077.7 1,201.5 1,264.5 1,340.4
Minority Interest 0.0 0.0 0.0 0.0
Secured & unsecured debt 1,656.1 2,131.7 2,631.7 2,781.7
Deferred Tax Liablity 138.1 194.4 194.4 194.4
Sources of funds 2,871.9 3,527.7 4,090.7 4,316.6
Assets
Gross Block 1476.4 1768.2 1823.2 1973.2
less: Acc. Depreciation 371.5 506.7 708.3 915.7
Net Block 1104.9 1261.5 1114.9 1057.5
Capital WIP 27.5 44.4 189.4 239.4
Net Fixed Assets 1132.4 1305.9 1304.3 1296.8
Investment 49.2 78.3 128.3 148.3
Inventories 720.5 868.2 931.5 983.8
Trade Receivables 2291.7 1678.8 1795.5 1972.3
Cash 78.5 42.8 89.5 82.3
Loans & Advances 473.4 610.2 767.0 812.1
Other current assets 176.8 1647.8 1649.5 1894.8
Total current assets 3740.9 4847.8 5233.1 5745.3
Current Liab. & Prov. 2050.5 2704.2 2575.0 2873.8
Net Current Asset 1690.3 2143.6 2658.1 2871.5
Application of funds 2,871.9 3,527.7 4,090.7 4,316.6
Source: Company, ICICIdirect.com Research
Key ratios
FY11 FY12 FY13E FY14E
Per share data (|)
EPS 24.8 18.0 11.9 15.3
Cash EPS 57.2 54.9 52.5 57.1
BV 217.0 242.0 254.7 270.0
Revenue per share 944.6 1,187.8 1,220.4 1,367.1
Cash Per Share 15.8 8.6 18.0 16.6
Operating Ratios (%)
EBITDA Margin 10.2 8.9 9.0 9.2
PBT / Net Sales 4.2 2.3 1.6 1.7
PAT Margin 2.6 1.5 1.0 1.1
Work ing Capital (ex cash) days 125.4 130.0 154.7 150.0
Debtor days 49.5 49.9 58.8 63.2
Creditor days 134.0 86.7 80.7 80.6
Return Ratios (%)
RoE 12.0 7.8 5.1 5.8
RoCE 12.7 11.4 9.5 10.3RoIC 13.4 11.6 10.4 11.0
Valuation Ratios (x)
P/E 6.7 9.2 13.9 10.8
EV / EBITDA 5.0 5.5 6.2 5.7
EV / Net Sales 0.5 0.5 0.6 0.5
Price to Book Value 0.8 0.7 0.7 0.6
Solvency Ratios
Debt/EBITDA 3.3 4.0 4.7 4.3
Net Debt / Equity 1.5 1.7 2.0 2.0
Current Ratio 1.8 1.8 2.0 2.0
Quick Ratio 1.8 1.8 2.0 2.0
Source: Company, ICICIdirect.com Research
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ICICI Securities Ltd|Retail Equity Research Page 7
Company Description
Simplex Infrastructure (SIL) is one of the leading infrastructure
construction companies present across all verticals within the
infrastructure space. The company started as a piling contractor and went
on to ramp up its capabilities and currently executes projects in the
power, industrial structures, buildings, roads, railways, marine and urban
infrastructure segments. SILs diversification policy is focused on building
a versatile business model in terms of segmental mix as well as
geographical contribution. The company has also successfully entered
the Middle Eastern markets where it has achieved significant scale.
Exhibit 12:Recommendation History
0
60
120
180
240
300
360
Feb-13Jan-13Nov-12Oct-12Aug-12Jul-12May-12Apr-12Mar-12
Price Target Price
.
Source: Reuters, ICICIdirect.com Research
Exhibit 13:Recent ReleasesDate Event CMP Target Price Rating
16-Nov-11 Q2FY12 Result Update 206 285 Buy
16-Feb-12 Q3FY12 Result Update 233 331 Buy
1-Jun-12 Q4FY12 Result Update 213 301 Buy
14-Aug-12 Q1FY13 Result Update 204 283 Buy
15-Nov-12 Q2FY13 Result Update 196 262 Buy
Source: Company, ICICIdirect.com Research
CICIdirect.com coverage universe (Construction)CMP M Cap
(|) TP(|) Rating (| Cr) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E
HCC (HINCON) 17 15 Sell 1,037 -1.9 -2.5 -1.8 NA NA NA 12.0 13.6 12.1 0.8 0.9 1.0 -15.7 -9.0 -9.4
VRCL (IVRINF) 31 26 Sell 941 0.6 -4.5 0.6 48.1 NA 44.1 6.6 16.7 7.6 0.4 0.4 0.4 0.6 -8.6 0.9
NCC (NAGCON) 41 45 Hold 1,060 1.4 2.3 2.3 13.0 7.8 8.1 8.3 8.3 7.3 0.5 0.5 0.5 1.5 2.5 2.3
Simplex Infra (SIMCON) 166 228 Buy 822 18.0 17.1 23.9 10.9 11.5 8.2 5.8 5.6 5.2 0.8 0.8 0.7 7.8 7.1 8.8
Supreme Infra (SUPINF) 229 301 Buy 383 54.8 63.2 75.2 3.3 2.9 2.4 4.5 3.9 3.5 1.1 0.9 0.7 24.7 22.3 21.1
Unity Infra (UNIINF) 36 53 Buy 267 14.0 12.5 10.5 2.7 3.0 3.6 3.5 3.5 3.6 0.4 0.4 0.4 14.8 11.8 9.0
Source: Company, ICICIdirect.com Research
Sector / Company
EPS (|) P/E (x) EV/EBITDA (x) P/B (x) RoE (%)
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ICICI Securities Ltd Retail Equity Research Page 8
CICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
arget price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head Research pankaj.pandey@icicisecurities.comICICIdirect.com Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No. 7, MIDC,Andheri (East)
Mumbai 400 093
research@icicidirect.com
We /I, Deepak Purswani CFA, PGDM (FINANCE) Bhupendra Tiwary MBA (FINANCE) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this
esearch report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to
he specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
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nderwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of
ompanies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities
enerally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts
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he information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
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