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LancoInfratech
Lowerrealisationsovershadowvolumegrowth
February13,2013
Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm')
does and/or seeks to do business with companies covered in its
research reports. As a result investors should be aware tha
the Firm may have a conflict of interest that could affect the
objectivity of the report. Investors should consider this report as
only a single factor in making their investment decision.
Please refer to important disclosures and disclaimers at the end
of the report
Rupa Shah
[email protected]
+91-22-66322244
Rating Accumulate
Price Rs12
Target Price Rs14
Implied Upside 16.7%
Sensex 19,608
Nifty 5,933
(PricesasonFebruary13,2013)Tradingdata
Market Cap. (Rs bn) 28.2
Shares o/s (m) 2,389.7
3M Avg. Daily value (Rs m) 324.5
Majorshareholders
Promoters 70.83%
Foreign 2.94%
Domestic Inst. 2.22%
Public & Other 24.01%
StockPerformance
(%)
1M
6M
12M
Absolute (15.7) (8.5) (26.9)
Relative (15.4) (19.7) (37.3)
HowwedifferfromConsensus
EPS(Rs) PL Cons. %Diff.2014 -2.0 1.0 NA
2015 0.6 1.1 45.2
PricePerformance(RIC:LAIN.BO,BB:LANCIIN)
Source:Bloomberg
0
5
10
15
20
25
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
(Rs)
! Powerrevenuestable,EPCcontinuestodrag:Power segment sales in
Q3FY13were up by 14% and generation volumes rose by 30% QoQ. As
internal project
continues to be slow, EPC revenues were down by 28% QoQ and
70.3% YoY.
Revenues from resources were up by 17% QoQ and 24% YoY, mainly
driven by a
15% YoY sales volume growth. Solar segment revenues were down by
75% YoY
Overall sales for Q3FY13 were up by 15.2% YoY.
! Volume analysis: Kondapalli project reported a decline of
18.4% in volumesQoQ on account of lower gas availability.
Amarkantak also reported 2.4% rise in
volumes QoQ as last quarter, the plants were shut partially on
account of
maintenance and in this quarter, Unit 1 was shut due to tube
leakage. Udupi
reported growth in generation by 49% QoQ on account of full
commissioning
effect of 1200MWs and higher PLFs. Anpara, which was a main drag
in Q2FY13
saw an increase in volumes by 82% QoQ as the PLFs improved to
52%. Budhils
volumes suffered, as seasonally, its a weak period for Hydro
power projects
Trading volumes were up by 48% YoY and down by 13% QoQ. Griffin
productionwas up by 14% YoY and 10% QoQ at 0.8mt.
! EBITDA takes a hit again: Consolidated Power EBITDA margins
adjusted foforex went down by 200bps QoQ, at 31% margins, mainly on
account of lower
tariffs and higher cost. Though the revenues declined, EPC
margins improved by
500bps YoY and 400bps QoQ, mainly as some projects got
completed.
! Capitalisation of plants and soaring debt magnify Power sector
losses: FoQ3FY13, after adjusting forex losses, net loss stood at
Rs3.6bn (Q2FY12 loss was
at Rs2.7bn) on account of lower margins, capitalisation and
soaring interest
charges.
Contd2
Keyfinancials(Y/eMarch) 2012 2013E 2014E 201
Revenues (Rs m) 101,194 137,763 164,502 184,34
Growth(%) 27.3 36.1 19.4 12
EBITDA (Rs m) 17,899 23,890 31,162 34,85
PAT (Rs m) (1,120) (11,961) (4,817) 1,40
EPS (Rs) (0.5) (5.0) (2.0) 0
Growth(%) (126.2) 967.9 (59.7) (129.
Net DPS (Rs)
Profitability&Valuation 2012 2013E 2014E 201
EBITDAmargin
(%)
17.7 17.3
18.9 18
RoE(%) (2.4) (29.1) (14.6) 4
RoCE(%) 2.7 1.1 2.4 3
EV / sales (x) 3.2 3.1 2.5 1
EV / EBITDA (x) 18.1 17.9 13.2 10
PE (x) (25.2) (2.4) (5.9) 20
P / BV (x) 0.6 0.8 0.9 0
Netdividendyield(%)
Source:CompanyData;PLResearch
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Lanco Infratech
! Valuation: At CMP, the stock is trading at 0.9x FY15E P/BV
which is factoring inhigher losses in existing assets. However,
gradual tariff revision and
improvement in operational performance may trigger some
medium-term gains
We have revised our TP downwards taking into account higher debt
burden and
slower execution on EPC front. Moreover, the stock has corrected
by 15% over
the last quarter, with no major negative connotation from
business point of
view. Thus, we upgrade the stock from ReducetoAccumulate.
Exhibit1: Q3FY13ResultOverview(Rsm)Y/eMarch Q3FY13 Q3FY12
YoYgr.(%) Q2FY13 9MFY13 9MFY12
YoYgr.(%)Salesposteliminationonintersegrev 34,887 30,293 15.2
31,848 101,692 67,928 49.7Expenditure
Consumption of Raw Materials, Generation Exps 18,187 16,849 7.9
14,714 51,612 35,335 46.1
%ofNetSales 45.5 55.9 36.8 33.0 24.8
Increase/Decrease in WIP (1,341) (701) (1,056) (3,281)
(5,985)
%
of
Net
Sales
(3.4)
(2.3)
(2.6)
(2.1)
(4.2)Purchase of Trading Power 6,441 3,098 107.9 7,267 19,151
8,359 129.1
%ofNetSales 16.1 10.3 18.2 12.3 5.9
Personnel Cost 1,550 1,988 (22.1) 1,670 5,078 5,411 (6.2)
%ofNetSales 3.9 6.6 4.2 3.2 3.8
Construction, Transport, Mining Expenses 3,443 2,203 56.3 3,093
9,583 7,642 25.4
%ofNetSales 9.9 7.3 9.7 9.4 11.2
Other Expenditure 939 827 13.6 946 2,811 2,538 10.7
%ofNetSales 2.3 2.7 2.4 1.8 2.7
Total Expenditure 29,218 24,263 20.4 26,633 84,952 53,301
59.4
EBITDA 5,669 6,030 (6.0) 5,214 16,740 14,627 14.4
Margin(%)
16.2
19.9
16.4
16.5
21.5
Depreciation 3,051 1,501 103.2 2,799 8,404 4,009 109.6
EBIT 2,618 4,529 (42.2) 2,416 8,337 10,618 (21.5)
Interest 6,737 2,682 151.1 5,267 17,393 7,499 131.9
Other Income 377 244 54.9 246 945 759 24.4
Forex Loss/Gain (429) (259) NA 2,123 (608) (2,317) NA
Add: elimination profits 189 1,754 (89.2) (122) 517 6,507
(92.0)
Exceptional - - - - 483
PBT (3,982) 3,585 NA (604) (8,202) 8,552 NA
Tax 573 533.9 7.2 626 1,417 2,027 (30.1)
Tax
Rate
(%)
(14.4)
14.9
(103.6)
(17.3)
23.7
RecurringPat (4,554) 3,051 NA (1,230) (9,619) 6,524 NA
Minority Interests & Eliminations (92) (2,442) (129) (798)
(8,378)
PATAMIPostElimination (4,646) 609 NA (1,359) (10,417) (1,854)
NA
Adj.PAT (3,645) 789.0 NA (2,781) (8,537) 5 NA
Source:CompanyData,PLResearch
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Exhibit2: SegmentalBreakup(Rsm)Y/eMarch Q3FY13 Q3FY12 YoYgr.(%)
Q2FY13 9MFY13 9MFY12 YoYgr.(%Revenues
Power 25,337 13,011 94.7 22,256 68,898 33,631 104.9
Construction 9,284 31,231 (70.3) 12,996 39,062 69,839 (44.1
Real Estate 530 201 164.2 347 948 723 31.2
Resources 2,053 1,598 28.4 1,658 5,426 4,830 12.4
Unallocated 209 136 53.6 199 606 378 60.5
Total 37,413 46,177 (19.0) 37,455 114,940 109,399 5.1
Less: Inter-segmental Revenues 2,273 15,669 (85.5) 5,393 12,692
40,872 (68.9
NetRevenues 35,140 30,508 15.2 32,063 102,247 68,527
49.2EBIT
Power 3,627 1,821 99.2 3,523 8,879 6,748 31.6
Margin(%) 14.3 14.0 15.8 12.9 20.1
Construction 699 3,893 (82.1) 1,768 3,505 10,713 (67.3
Margin(%) 7.5 12.5 13.6 9.0 15.3
Real Estate 9 (3) NA 1 (16) -
Margin(%) 1.8 (1.6) 0.3 (1.7)
Resources (1,404) 548 NA (775) (3,445) (1,395) NA
Margin(%) (68.4) 34.3 (46.7) (63.5) (28.9)
Unallocated (300) (19) NA 113 (122) (170) NA
Margin(%) (143.3) (13.9) 56.7 (20.1) (45.0)
Total 2,631 6,239 (57.8) 4,631 8,800 15,896 (44.6
Margin(%) 7.5 20.5 14.4 8.6 23.2
Less: Inter-segmental Profit 189 1,757 (89.3) (122) 517 6,510
(92.1Total 2,442 4,483 (45.5) 4,753 8,282 9,387 (11.8
Source:CompanyData,PLResearch
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Lanco Infratech
IncomeStatement(Rsm)
Y/eMarch 2012 2013E 2014E 2015E
NetRevenue 101,194 137,763 164,502 184,344
Raw Material Expenses 71,532 104,521 120,928 135,745
Gross Profit 29,662 33,242 43,574 48,599
Employee Cost
Other Expenses 11,763 9,352 12,412 13,741EBITDA 17,899 23,890
31,162 34,858
Depr. & Amortization 5,628 11,564 13,512 14,741
Net Interest 10,539 24,052 22,412 19,452
Other Income (3,666) 591 1,012 508
ProfitbeforeTax (1,933) (11,135) (3,750) 1,173
Total Tax 2,246 1,987 841 537
ProfitafterTax (4,180) (13,122) (4,591) 636
Ex-Od items / Min. Int. (5,982) 979 425 500
Adj.PAT (1,120) (11,961) (4,817) 1,402
Avg.SharesO/S(m) 2,389.7 2,389.7 2,389.7 2,389.7
EPS(Rs.) (0.5) (5.0) (2.0) 0.6
CashFlowAbstract(Rsm)
Y/eMarch
2012
2013E
2014E 2015E
C/F from Operations 32,066 24,110 17,166 36,380
C/F from Investing (155,894) (103,446) 20,212 42,803
C/F from Financing 124,424 81,269 (47,398) (77,183)
Inc. / Dec. in Cash 596 1,933 (10,021) 1,999
Opening Cash 12,905 13,500 15,433 5,412
Closing Cash 13,500 15,433 5,412 7,411
FCFF (80,506) (88,166) (30,603) (9,646)
FCFE 62,027 18,527 (57,240) (69,716)
KeyFinancialMetrics
Y/eMarch
2012
2013E
2014E 2015E
Growth
Revenue (%) 27.3 36.1 19.4 12.1
EBITDA (%) (12.9) 33.5 30.4 11.9
PAT (%) (126.2) 967.9 (59.7) (129.1)
EPS (%) (126.2) 967.9 (59.7) (129.1)
Profitability
EBITDA Margin (%) 17.7 17.3 18.9 18.9
PAT Margin (%) (1.1) (8.7) (2.9) 0.8
RoCE (%) 2.7 1.1 2.4 3.7
RoE (%) (2.4) (29.1) (14.6) 4.5
BalanceSheet
Net Debt : Equity 6.3 11.4 12.5 10.0
Net Wrkng Cap. (days) (192) (69) (44) (33)Valuation
PER (x) (25.2) (2.4) (5.9) 20.1
P / B (x) 0.6 0.8 0.9 0.9
EV / EBITDA (x) 18.1 17.9 13.2 10.0
EV / Sales (x) 3.2 3.1 2.5 1.9
EarningsQuality
Eff. Tax Rate 20.3 (20.3) (22.4) 22.0
Other Inc / PBT 49.1 (12.1) (27.0) 63.2
Eff. Depr. Rate (%) 2.7 3.9 4.2 4.3
FCFE / PAT (5,538.1) (154.9) 1,188.3 (4,971.0)
Source:CompanyData,PLResearch.
BalanceSheetAbstract(Rsm)
Y/eMarch 2012 2013E 2014E 2015E
Shareholder's Funds 47,061 35,099 30,804 32,206
Total Debt 309,050 415,743 389,106 329,036
Other Liabilities 16,415 18,775 18,914 18,916
TotalLiabilities 372,526 469,618 438,824 380,158
Net Fixed Assets 308,657 398,809 361,898 300,444Goodwill
Investments 27,643 28,952 29,241 29,241
Net Current Assets 36,225 41,857 47,685 50,473
Cash&Equivalents 14,121 15,433 5,412 7,411
OtherCurrentAssets 120,847 126,509 160,213 190,028
CurrentLiabilities 98,742 100,085 117,940 146,966
Other Assets
TotalAssets 372,525 469,618 438,824 380,158
QuarterlyFinancials(Rsm)
Y/eMarch
Q4FY12
Q1FY13
Q2FY13 Q3FY13
NetRevenue 33,762 34,958 31 ,848 34,887
EBITDA 3,767 5,857 5,214 5,669
%ofrevenue 11.2 16.8 16.4 16.2
Depr. & Amortization 1,619 2,554 2,799 3,051
Net Interest 3,040 5,389 5,267 6,737
Other Income 1,650 (1,982) 2,123 377
ProfitbeforeTax 2,513 (3,617) (606) (3,502
Total Tax 219 218 626 573
ProfitafterTax 728 (4,412) (1,360) (4,646
Adj.PAT 728 (2,102) (2,782) (3,645
KeyOperatingMetrics
Y/e
March
2012
2013E
2014E 2015EProject Dev. (Rs m) 99,236 50,297 55,327 49,794
Sale of Energy (Rs m) 46,126 90,452 103,392 118,456
Resources (Rs m) 6,903 10,395 12,579 13,668
Property Dev. (Rs m) 753 2,063 2,761 5,521
Roads (Rs m) 2,688 2,854 2,854
Int. Rate (%) 4 6 6 6
Capacity Add. (MWs) 682 2,344 1,980 250
Capex (Rs bn) 88 83 23 25
EBIDTA Marg. (%) 18 17 19 19
Debt (Rs bn) 280 416 389 329
Source:CompanyData,PLResearch.
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February 13, 2013 5
Lanco Infratech
Prabhudas Lilladher Pvt. Ltd.
3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400
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Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
RatingDistributionofResearchCoverage
18.6%
55.9%
24.6%
0.8%
0%
10%
20%
30%
40%
50%
60%
BUY Accumulate Reduce Sell
%ofT
otalCoverage
PLsRecommendation
Nomenclature
BUY : Over 15% Outperformance to Sensex over 12-months
Accumulate : Outperformance to Sensex over 12-months
Reduce : Underperformance to Sensex over 12-months Sell : Over
15% underperformance to Sensex over 12-months
TradingBuy : Over 10% absolute upside in 1-month TradingSell :
Over 10% absolute decline in 1-month
NotRated(NR) : No specific call on the stock UnderReview(UR) :
Rating likely to change shortly
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use by the recipient only as
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