Result Flash on Sadbhav Engineering for 4QFY2011

For 4QFY11 Sadbhav Engineering (SEL) posted numbers much higher than our and street expectations. The company reported a staggering 128.9% growth yoy on the top-line front to Rs1,047cr (Rs457.2cr) vs our estimate of Rs603.6cr. Ramp-up in execution of captive road BOT projects via sub-contracting on Bijapur – Hungund, Hyderabad – Yadgiri and Maharashtra Border Check Post projects led to this stupendous growth in the revenues. On EBITDA front, SEL posted a fall of 320bps, in line with high subcontracting, to 8.7% (11.9%) below our estimates of 11.5%. On the earning front, SEL reported a stunning 288.2% growth yoy to Rs 53.9cr (Rs 13.9cr) substantially higher than our expectations of Rs 36.4cr mainly due jump in revenues. Interest and depreciation cost came in line with our estimates. We maintain Buy on the stock.

4QFY2011 Performance highlights (Standalone)

Y/E March (Rs cr)	4QFY11	4QFY10	% chg (yoy)	3QFY11	% chg (qoq)	FY2011	FY2010	% chg
Net Sales	1,046.7	457.2	128.9	476.2	119.8	2,209.2	1,256.9	75.8
Total Expenditure	955.9	402.9	137.3	423.3	125.8	1,983.4	1,119.3	77.2
Operating Profit	90.8	54.4	67.1	52.9	71.8	225.8	137.7	64.0
OPM (%)	8.7	11.9	(320)bp	11.1	(240)bp	10.2	11.0	(80)bp
Interest	11.3	11.0	3.2	9.7	16.9	28.4	33.1	(14.2)
Depreciation	6.9	11.7	(40.8)	6.8	0.7	26.9	23.3	15.5
Non Operating Income	3.4	6.9	(51.2)	4.3	(21.2)	5.2	16.6	(68.7)
Non-recurring items	-	-	-	-	-	-	-	-
Profit Before Tax	76.0	38.6	96.8	40.6	87.1	175.7	98.0	79.4
Tax	22.0	24.7	(10.8)	14.2	54.9	56.2	44.1	27.3
Reported Profit After Tax	53.9	13.9	288.2	26.4	104.4	119.6	53.8	122.1
PAT (%)	5.2	3.0	220bp	5.5	(30)bp	5.4	4.3	110bp
EPS (Rs)	3.9	1.0	288.2	1.9	104.4	8.7	3.9	122.1

Source: Company, Angel Research

4QFY2011 Actual v/s Angel estimates

(Rs cr) Actual Estimates Variation (%) Revenue (Rs cr) 1,046.7 603.6 73.3 EBITDA margin (%) 8.7 11.5 (280)bp PAT (Rs cr) 53.9 36.4 48.2

Source: Company, Angel Research

Outlook and Valuation: Sadbhav Engineering is executing its captive projects at a fast pace and the company is expecting to complete Hyderabad - Yadgiri project in 1HFY2012.  Further, Bijapur - Hungund and Dhule - Palasner projects are also expected to get substantially completed in FY2012 and start generating tolls. Going ahead, SEL is banking on winning projects from NHAI but it is currently staying away from stiff competition in the road segment. We believe that winning projects would play a key role to maintain growth, although the current order book of ~ Rs 6,600cr (3xFY2011 revenues) provides enough revenue visibility for next couple of years.  Earning concall is scheduled later today post which we would come out with detailed note and revised Target Price.