1. 4QFY2010 Result Update I Infrastructure
May 24, 2010
Sadbhav Engineering NEUTRAL
CMP Rs1,271
Performance Highlights Target Price -
Sadbhav Engineering (SEL) reported Standalone 4QFY2010 numbers, which Investment Period -
were below our estimates on the Top-line front. On the Operating Profit front
Stock Info
the company reported numbers lower than our expectations, but registered
growth on a yoy basis. Higher Depreciation and Tax provisioning (on account Sector Infrastructure
of reversal of tax benefits claimed under Sec 80-IA for FY2008 and FY2009)
took toll on Bottom-line. The company has provided for Rs11.3cr on account Market Cap (Rs cr) 1,589
of reversal of tax benefits claimed under Sec 80-IA for FY2008 and FY2009. Beta 0.7
Interest income lessened the impact on the Bottom-line. Owing to the rich
valuations at which the stock is trading, we maintain our Neutral view on the 52 WK High / Low 1,395/575
stock. Avg. Daily Volume 4637
Top-line below expectations, higher Tax provisioning dents Bottom-line: SEL Face Value (Rs) 10
registered 14.7% yoy growth in Top-line to Rs457cr, which was below our
expectation of Rs559cr. The Roads Segment contributed Rs358.5cr (78.4%) BSE Sensex 16,470
for 4QFY2010 Top-line, while the Irrigation and Mining Excavation segment
Nifty 4,944
contributed 6.1% and 15.5%, respectively. Operating Margin was reported at
11.9%, as against our expectation of 13.3%. Higher Depreciation and Tax Reuters Code SADE.BO
provisioning (on account of reversal of tax benefits claimed under Sec 80-IA
Bloomberg Code SADE@IN
for FY2008 and FY2009) took toll on Bottom-line. The company has provided
for Rs11.3cr on account of reversal of tax benefits claimed under Sec 80-IA for Shareholding Pattern (%)
FY2008 and FY2009. Interest income earned from loans to subsidiaries
restricted the impact on the Bottom-line. Promoters 47.6
Outlook and Valuation: Robust Order Book of Rs6,768cr (or 5.4x FY2010 MF/Banks/Indian FIs 24.2
Revenue), spread across the Roads (76.8%), Irrigation (9.5%) and Mining
FII/NRIs/OCBs 23.4
Excavation (13.7%) Segments, continues to provide Top-line visibility. We have
valued SEL on an SOTP basis, wherein its Core Construction business has Indian Public 4.8
been valued on 12x P/E on FY2012E basis (Rs834/share) and its exposure to
Abs (%) 3m 1yr 3yr
Road BOT (Build Operate Transfer) assets (eight projects) at 1x FY2012 P/BV,
contributing Rs418/share. We have not considered the Rohtak-Panipat road Sensex 1.3 18.6 15.8
BOT project in our valuation as it is yet to achieve financial closure. We
believe that the current valuations factor in most of the near-term positives for Sadbhav 8.6 112.8 142.1
the stock. Hence we remain Neutral on the stock.
Key Financials (Standalone)
Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
Net Sales 1,062 1,257 1,560 1,911
% chg 18.7 18.3 24.1 22.5
Adj. Net Profit 63.3 53.8 71.8 86.9
% chg 29.5 (15.1) 33.6 21.0
FDEPS (Rs) 51.0 43.0 57.5 69.5
EBITDA Margin (%) 10.2 10.9 11.2 11.3
P/E (x) 24.9 29.6 22.1 18.3 Shailesh Kanani
RoE (%) 20.2 14.6 17.0 17.5 Tel: 022 – 4040 3800 Ext: 321
E-mail: shailesh.kanani@angeltrade.com
RoCE (%) 18.3 16.8 16.8 16.6
P/BV (x) 4.6 4.1 3.5 3.0
Aniruddha Mate
EV/Sales (x) 1.7 1.5 1.3 1.2
Tel: 022 – 4040 3800 Ext: 335
EV/EBITDA (x) 14.9 14.0 12.0 10.5 E-mail: aniruddha.mate@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
2. Sadbhav Engineering I 4QFY2010 Result Update
Exhibit 1: 4QFY2010 Performance (Standalone)
Y/E March (Rs cr) 4QFY10 4QFY09 % chg FY2010 FY2009 % chg
Net Sales 457.2 398.6 14.7 1,257 1,062 18.3
Total Expenditure 402.9 362.7 11.1 1,119 954.2 17.3
Operating Profit 54.4 35.9 51.3 137.7 108.3 27.1
OPM (%) 11.9 9.0 - 11.0 10.2 -
Interest 11.0 7.5 46.5 33.1 21.4 54.7
Depreciation 11.7 4.4 165.4 23.3 15.7 48.3
Non Op. Income 6.9 9.7 (29.0) 16.6 11.7 42.4
Non recurring items - - - - - -
Profit Before Tax 38.6 33.8 14.4 98.0 82.9 18.1
Tax 24.7 4.3 468.3 44.1 19.6 124.6
Reported PAT 13.9 29.4 (52.7) 53.8 63.3 (14.9)
PAT (%) 3.0 7.4 - 4.3 6.0 -
EPS (Rs) 11.1 23.5 (52.7) 43.1 50.6 (14.9)
Source: Company, Angel Research
Robust Order Book lends Revenue visibility
SEL has an Order Book of Rs6,768cr (or 5.4x FY2010 Revenue), spread across the
Roads (76.8%), Irrigation (9.5%) and Mining Excavation (13.7%) segments which
continue to provide Top-line visibility. The Order Book of the Road and Irrigation
segments has an average execution period of 33 months, whereas that of the Mining
excavation segment is four years.
Outlook and Valuation
Robust Order Book of Rs6,768cr (or 5.4x FY2010 Revenue) spread across the
Roads, Irrigation and Mining Excavation segments continue to provide Top-line
visibility. Of the recently bagged three Road BOT projects, the company has
achieved financial closure for two projects, which makes it eligible for bidding for
newer Road BOT projects, as per the new NHAI norm, wherein a company cannot
bid for Road BOT projects if it has three or more road BOT projects awaiting
financial closure.
We have valued SEL on an SOTP basis, wherein its Core Construction business has
been valued on 12x P/E on FY2012E basis (Rs834/share) and its exposure to Road
BOT (Build Operate Transfer) assets (eight projects) at 1x FY2012E P/BV,
contributing Rs418/share. We have not considered the Rohtak-Panipat road BOT
project in our valuation as it is yet to achieve financial closure. We believe that the
current valuations factor in most of the near-term positives for the stock. Hence we
remain Neutral on the stock.
May 24, 2010 2
3. Sadbhav Engineering I 4QFY2010 Result Update
Profit & Loss Statement (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Net Sales 489 895 1,062 1,257 1,560 1,911
Other operating income - - - - - -
Total operating income 489 895 1,062 1,257 1,560 1,911
% chg 68.2 83.1 18.7 18.3 24.1 22.5
Total Expenditure 428 798 954 1,119 1,384 1,695
Net Raw Materials 137 234 276 337 418 503
Other Mfg costs 260 524 625 730 902 1,110
Personnel 30 39 51 52 64 80
Other 0 2 1 1 1 2
EBITDA 61 96 108 138 175 216
% chg 69.5 58.3 12.4 27.1 27.4 23.1
(% of Net Sales) 12.5 10.8 10.2 10.9 11.2 11.3
Depreciation& Amortisation 15 14 16 23 23 25
EBIT 46 82 93 114 153 191
% chg 108.9 79.4 12.3 23.4 33.4 25.3
(% of Net Sales) 9.4 9.2 8.7 9.1 9.8 10.0
Interest & other Charges 7 16 21 33 50 67
Other Income 3 4 12 17 5 5
(% of PBT) 7.0 5.5 14.1 17.0 4.3 4.0
Share in profit of Associates - - - - - -
Recurring PBT 42 71 83 98 107 130
% chg 212.2 68.4 17.4 18.0 9.5 21.0
Extraordinary Expense/(Inc.) - - - - - -
PBT (reported) 42 71 83 98 107 130
Tax 12 24 19 44 35 43
(% of PBT) 28.7 33.4 23.2 45.1 33.0 33.0
PAT (reported) 30 47 64 54 72 87
Add: Share of earnings of
- - - - - -
assoc.
Less: Minority interest (MI) - - - - - -
Prior period items - - - - - -
PAT after MI (reported) 30 47 64 54 72 87
ADJ. PAT 27 49 64 54 72 87
% chg 90.5 83.8 30.3 (15.6) 33.6 21.0
(% of Net Sales) 5.4 5.5 6.0 4.3 4.6 4.5
Basic EPS (Rs) 24 39 51 43 57 70
Fully Diluted EPS (Rs) 21 39 51 43 57 70
% chg 92.2 83.8 30.3 (15.6) 33.6 21.0
May 24, 2010 3
4. Sadbhav Engineering I 4QFY2010 Result Update
Balance Sheet (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 10.9 12.5 12.5 12.5 12.5 12.5
Preference Capital - - - - - -
Reserves& Surplus 136 270 331 379 444 524
Shareholders Funds 147 286 343 391 456 537
Minority Interest - - - - - -
Total Loans 73 150 211 393 558 735
Deferred Tax Liability 9 10 11 11 11 11
Total Liabilities 229 446 566 795 1,025 1,283
APPLICATION OF FUNDS
Gross Block 202 241 261 306 341 381
Less: Acc. Depreciation 90 98 106 125 148 173
Net Block 112 143 155 181 193 208
Capital Work-in-Progress - - - - - -
Goodwill - - - - - -
Investments 46 120 125 160 259 357
Current Assets 323 434 592 807 1,006 1,255
Cash 25 10 10 57 42 63
Loans & Advances 99 168 276 324 402 494
Other 176 255 306 426 562 698
Current liabilities 250 204 259 306 387 491
Net Current Assets 68 181 288 455 574 718
Misc. Exp. not written off 3 2 1 - - -
Total Assets 229 446 566 795 1,025 1,283
Cash Flow Statement (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Profit Before Tax 42 71 83 98 107 130
Depreciation 15 14 16 23 23 25
Change in Working Capital 16 127 105 123 133 124
Less: Other income - 6 - 17 5 5
Direct taxes paid 12 24 19 44 35 43
Cash Flow from Operations 29 (72) (26) (62) (43) (17)
(Inc.)/ Dec. in Fixed Assets (22) (39) (19) (45) (35) (40)
(Inc.)/ Dec. in Investments (36) (74) (4) (35) (99) (99)
Inc./ (Dec.) in loans and advances - - - - - -
Other income - 6 - 17 5 5
Cash Flow from Investing (58) (108) (23) (64) (129) (134)
Issue of Equity - 90 - - - -
Inc./(Dec.) in loans 21 77 61 182 164 178
Dividend Paid (Incl. Tax) 5 6 6 6 7 7
Others (5) 4 (6) (4) - -
Cash Flow from Financing 11 165 49 173 158 171
Inc./(Dec.) in Cash (18) (15) (0) 47 (15) 20
Opening Cash balances 43 25 10 10 57 42
Closing Cash balances 25 10 10 57 42 63
May 24, 2010 4
6. Sadbhav Engineering I 4QFY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Sadbhav Engg.
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
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May 24, 2010 6
