Monday, August 9, 2010


Sales Up 74%, PAT up by 81% YoY
SIIL has reported excellent results. Net Sales at Rs. 1841 mn compared to 1059 mn in Q1FY10, Up 74% YoY, while PAT stood at Rs. 156 mn compared to Rs 86 mn in Q1FY10, Up 81% YoY. On QoQ basis, Sales was up by 7%, while PAT was up by 42%. Results are above our estimates.

Strong Order book at ` 20 bn translates into 3.7x of FY10 revenues
SIIL has diversified order book of ` 20 bn (including L1 of ` 3.3 bn) currently, while the average execution cycle is 24-30 moths. The current order book is 3.7x of FY10 revenues and provide revenue visibility for FY11E and FY12E. Order book is diversified across Buildings, Roads, Power transmission, Bridges and other segments.

Backward integration leads to higher margins, 19.7% in Q1FY11
SIIL reported EBIDTA margin of 19.7% in Q1FY11. The higher margin than industry is due to captive raw material with own quarries, crusher plants, Asphalt plants, RMC plants, Wet mix plants, tight cost controls and management efficiency. Higher margin in this quarter is also attributable to some of the road works which are about to be completed, where billing momentum has been good. We have been conservative in margin estimates for FY11E and FY12E to account for lower margins from increasing geographical spread and entry into new segments such as power transmission.

Foray into BOT projects, toll collections to start in FY13
SIIL has now focused on acquiring BOT portfolio as well and has 49% stake (74% after 3 years of project completion) in Manor Wada Bhiwandi Road project (4 laning of 64 KM) on SH-34 and SH-35 with a total project cost of Rs.4.3 bn. This project has a concession period of 22 years 10 months and is expected to be operational by Jun’12. On commissioning, the toll collection of ~`1.4 mn/day is expected. SIIL has also taken 10% stake in Kasheli road & bridge project where toll collection is expected at `1.1 mn/day on commissioning in FY13.

Valuations & Recommendation
At cmp of ` 292, SIIL is trading at P/E multiple of 8.9x of its FY11E and 6.4x on FY12E fully diluted EPS (at 16.74 mn shares) of ` 32.8 and ` 45.9 respectively. We maintain ‘Buy’ rating and Price target of ` 411 based on P/E multiple of 8x for construction business while BOT portfolio is valued at ` 44 per share based on NPV of FCFE method.

To read the full report: SIIL