Key highlights from the results
CCCL posted a disappointing set of numbers for the fourth consecutive quarter. The top-line of the company grew by mere 1.1% yoy to `643.0cr (`636.3cr) which was marginally lower than our estimate of `675.0cr. We believe this consistent disappointment on the top-line front, inspite of healthy order book at 2.3x FY2011 revenues, indicates that the company is facing some problems on the execution front. However, the shocker came at the operating front, as the company posted abysmal EBITDA margins of 3.5% (11.4%) a drop of 790bps, against our expectations of 150bps dip. On a sequential basis as well margins saw a decline of 620bps. The main reason for decline in margins is the jump of 710bps yoy in the materials cost as a percentage of sales and 170bps yoy increase in subcontracting cost. The company has cited error in estimation of material cost for fixed price contracts which has led to this disaster. Further as per management fixed price contracts form 21% of the overall order book which might face margin pressure. Hence, we are expecting overall margin pressure to continue in coming quarters given the quantum of fixed price contracts. This translated in Bottom-line de-growth of 95.5% on yoy basis.
Quarterly Performance (Standalone)
Y/E March (` cr) | 4QFY11 | 4QFY10 | 3QFY11 | % Chg (yoy) | % Chg (qoq) | FY2011 | FY2010 | % Chg |
Net Sales | 643.0 | 636.3 | 496.2 | 1.1 | 29.6 | 2136.7 | 1950.0 | 9.6 |
Total Expenditure | 620.5 | 563.9 | 447.9 | 10.0 | 38.5 | 1985.6 | 1767.0 | 12.4 |
Operating Profit | 22.5 | 72.3 | 48.3 | (68.9) | (53.5) | 151.0 | 183.0 | (17.5) |
OPM (%) | 3.5 | 11.4 | 9.7 | (790)bp | (620)bp | 7.1 | 9.4 | (230)bp |
Interest | 12.0 | 14.6 | 12.6 | (17.4) | (4.8) | 47.3 | 31.3 | 51.3 |
Depreciation | 3.5 | 2.9 | 3.4 | 19.6 | 3.3 | 12.9 | 10.0 | 28.8 |
Non Operating Income | 0.9 | 2.4 | 1.4 | (62.9) | (38.6) | 5.0 | 6.3 | (19.3) |
Nonrecurring items | 0.0 | (5.4) | 0.0 | - | - | 0.7 | 0.0 | - |
Profit Before tax | 7.8 | 51.8 | 33.8 | (84.9) | (76.8) | 96.6 | 148.0 | (34.7) |
Tax | 3.3 | 18.2 | 11.6 | (81.6) | (71.2) | 33.8 | 49.1 | (31.2) |
Net Profit before JV share | 4.5 | 33.6 | 22.2 | (86.6) | (79.7) | 62.9 | 98.9 | (36.4) |
Share of pfts to JV partner | 3.0 | 0.0 | 5.5 | 0.0 | 0.0 | 12.2 | 5.4 | 0.0 |
Net Profit after JV share | 1.5 | 33.6 | 16.7 | (95.5) | (90.9) | 50.7 | 93.5 | (45.7) |
PAT (%) | 0.2 | 5.3 | 3.4 | - | - | 2.4 | 4.8 | - |
Reported EPS | 0.08 | 1.8 | 0.9 | (95.5) | (90.9) | 2.7 | 5.1 | (45.7) |
Source: Company, Angel Research
4QFY2011 Actual v/s Angel estimates | ||||||||||||||||
| ||||||||||||||||
Source: Company, Angel Research |
Order Book update: The company had an order inflow of `1,160cr during the quarter, the only silver lining, taking its outstanding order book to `4,967.5cr for FY2011. Further, company has also bagged orders worth `1,445.1cr during April 2011 which implies healthy order booking.
Outlook and valuation: The company has consistently disappointed on the Top-line front and posted erratic numbers on the Bottom-line front for the last four quarters. The order inflow is showing signs of revival but the critical execution leg is dragging the performance of the company. Further, with margins expected under pressure we expect the stock to get de-rated on the bourses.
Also, CCCL commended a premium over peers given its superior return ratios which are headed southwards for next few quarters and hence further justifies the downgrade. Hence, we have revised our numbers downwards to factor in the same and our revised target price stands at `50 which is where the stock is currently trading. Hence, we downgrade the stock to Neutral from Buy.
Key Financials (Consolidated)
Y/E March (` cr) | FY2010 | FY2011 | FY2012E | FY2013E |
Net Sales (incl op. income) | 1,976 | 2,199 | 2,606 | 3,211 |
% chg | 7.3 | 11.3 | 18.5 | 23.2 |
Adj. Net Profit | 91.6 | 46.9 | 55.2 | 93.1 |
% chg | 26.6 | (48.8) | 17.7 | 68.6 |
FDEPS (`) | 5.0 | 2.5 | 3.0 | 5.0 |
EBITDA Margin (%) | 9.1 | 7.0 | 6.4 | 7.3 |
P/E (x) | 10.3 | 20.2 | 17.2 | 10.2 |
RoAE (%) | 16.6 | 7.7 | 8.5 | 13.1 |
RoACE (%) | 19.3 | 13.2 | 12.5 | 15.4 |
P/BV (x) | 1.6 | 1.5 | 1.4 | 1.3 |
EV/Sales (x) | 0.6 | 0.6 | 0.5 | 0.5 |
EV/EBITDA (x) | 6.2 | 8.4 | 8.5 | 7.2 |
Source: Company, Angel Research; Note: Numbers are expected to change post the concall
No comments:
Post a Comment