>SUPREME INFRASTRUCTURE INDIA LIMITED

Results Highlights
■ The company has registered a robust revenue growth of 70.4% yoy to Rs. 4,106 mn, showing superior execution strength of the company. This strong execution was seen in the building segment as well as in the road projects viz., Manor Wada Bhiwandi, Nagar Kopargaon and Patiala Malerkotla.


■ EBIDTA margins remained under pressure and declined by 34 bps yoy at 16.9%. This was mainly due to marginal rise in cost of materials as a percentage of sales by 332 bps yoy. Going ahead we expect the margins to remain between 16.5% to 17%.


■ At the PAT level we saw a decline in margins by 179 bps yoy at 6.1%. The decline was mainly due to rise in interest cost as a percentage of sale by 185 bps yoy at 6.2% and in addition to that we also saw increase in cost of deprecation by 58.5% yoy which further dented the margins.


■ Average cost of borrowing stands between 13% to 13.5%.


Other Highlights
■ The present order book stands at Rs. 37,725 mn including L1 of Rs. 4,210 mn (49.4% Roads, 5.85% Bridges, 0.44% Railways, 41.62% Buildings, 0.27% Irrigation, 1.94% Power & 0.48% Others) which gives the revenue visibility for next 24 to 30 months. The order book to bill ratio stands at ~4.0x FY11 sales. During the quarter SIIL, added orders worth ~Rs. 8,123 mn and YTD order inflow stands at ~Rs. 14,354 mn. We saw improvement in order inflows from last quarter and management expect to maintain the decent flow of orders going ahead. Additionally, the company is targeting ~Rs 40 bn as its closing order book by end of FY12 while the outstanding bids as on date stands at ~Rs 25 bn.


■ During the last quarter the company has added two new BOT projects viz., Sangli Shiroli in Maharashtra and Patiala Malerkotla, an ongoing project at Punjab which the company bought from the original concessionaire. Today the company has 9 BOT project of which two projects are operational viz., Kasheli Bridge and Nagar Kopargaon.


■ Recently in the month of Jan, 2012 management entered into a Private Equity deal with 3i India Infrastructure Fund to off load 49% stake in its four road BOT projects for US$61 mn. The road BOT projects includes Panvel Indapur which is under a separate SPV and the rest i.e. Sangli Shiroli, Nagar Kopargaon & Ahmednagar Karmala which is under Supreme Infra BOT Holdings Pvt. Ltd., as informed by the management. This deal will help the company to bring down the debt levels, meet its project equity requirement (~Rs 5.4 bn) and will ensure early financial closure of projects. With this deal we can see improvement in margins and higher execution which will drive the top line going forward.


Valuation & Outlook
In view of the growing order book, efficient execution of ongoing projects, backward integration and improving track record, we expect the company’s top line to grow at a healthy CAGR rate of ~39% during FY11A to FY13E. We also expect that the operational BOT projects wpuld generate steady cashflow to the company going forward. At current market price of Rs 223.75 the stock is trading at a P/E multiple of 4.4x and 3.5x to its FY12E and FY13E EPS of Rs. 51.1 and Rs. 63.8 per share. We maintain ‘BUY’ with a target price of Rs. 304 per share with an upside of 36% based on SOTP method. For the construction business we arrive at a price of Rs 255 per share which discount FY13E EPS of Rs 63.8 by 4.0x. For BOT projects viz., Manor-Wada-Bhiwandi (MWB) and Nagar Kopargaon (NK), which are valued on NPV basis gives a value of Rs. 49 per share.


RISH TRADER