1QFY2013 Result Update | Infrastructure

August 21, 2012

Simplex Infrastructures
Performance Highlights
Quarterly Highlights Standalone
Y/E March (` cr) Net sales Operating profit Net profit
Source: Company, Angel Research

BUY
CMP Target Price
Investment Period

`207 `265
12 Months

1QFY13 1,585 127 20

1QFY12 1,237 103 24

4QFY12 1,796 148 29

% chg (yoy) 28.1 23.6 (16.5)

% chg (qoq) (11.7) (14.4) (31.4)

Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Infrastructure 1,024 2,300 0.6 290/157 4,129 2 17,885 5,421 SINF.BO SINF@IN

For 1QFY2013, Simplex Infrastructures (Simplex) numbers came higher-thanexpectations on the revenue front but owing to higher interest cost, the performance at the earnings level was in line with our estimate. At the end of the quarter, the companys order book stood at `15,508cr (2.3x FY2013E revenue). Simplex witnessed an order inflow of `1,888cr for the quarter which was boosted by captive road build-operate-transfer (BOT) orders of ~`1,230cr. Numbers broadly in line with estimates: On the top-line front, Simplex reported a robust growth of 28.1% yoy to `1,585cr, higher than our estimate of `1,425cr (consensus `1,472cr). The revenue contribution from the domestic and overseas business stood at 88% and 12% respectively in 1QFY2013. The EBITDAM dipped by 30bp yoy to 8.0% for the quarter, marginally lower than our estimate of 8.3%. The interest cost came at `70.0cr, a y-o-y/q-o-q jump of 35.2%/2.3%, and higher than our estimate. The interest cost was higher owing to increase in working capital. The PAT declined by 16.5% yoy to `20.0cr, in line with our estimate and consensus of `20cr and `19cr respectively. Outlook and valuation: Simplex has been performing well on the revenue front since the last four consecutive quarters and has a strong order book (`15,508cr 2.3x FY2013E revenue). However the management has given a guidance of 10-15% on the revenue front for FY2013 owing to the macro challenges faced by the sector. Further, Simplex is a well-diversified player in terms of sectors, geographies and client mix and, unlike its peers, has limited exposure to road BOT assets. Hence, we maintain our Buy view on the stock with a target price of `265.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 55.0 26.1 13.8 5.2

Abs. (%) Sensex Simplex

3m 10.5

1yr 10.8

3yr 14.4 (48.3)

(1.7) (22.8)

Key financials (Consolidated)

Y/E March (` cr) Net Sales (incl op. income) % chg Adj. Net Profit % chg FDEPS (`) EBITDA Margin (%) P/E (x) RoAE (%) RoACE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 4,824 5.7 125 (2.0) 25.1 8.7 8.3 12.1 12.3 0.9 0.5 6.1

FY2012 6,010 24.6 84 (32.9) 16.8 7.6 12.3 7.3 10.6 0.9 0.5 6.7

FY2013E 6,732 12.0 116 38.7 23.4 8.1 8.9 9.2 10.9 0.8 0.5 6.4

FY2014E 7,837 16.4 146 26.0 29.4 8.4 7.0 10.6 11.8 0.7 0.5 5.9

Nitin Arora
022-39357800 Ext: 6842 nitin.arora@angelbroking.com

Please refer to important disclosures at the end of this report

Simplex Infra | 1QFY2013 Result Update

Exhibit 1: Quarterly performance (Standalone)

Y/E March (` cr) Net Sales Total Expenditure Operating Profit OPM (%) Interest Depreciation Non Operating Income Nonrecurring items Profit Before tax Tax Net Profit before MI PAT (%) Minority Interest (MI) Net Profit after MI Adj. PAT (%) Adj. FDEPS
Source: Company, Angel Research

1QFY13 1,585 1,458 127 8.0 70 32 5 30 10 20 1.3 20 1.3 4.0

1QFY12 1,237 1,135 103 8.3 51 24 8 35 11 24 1.9 24 1.9 4.8

4QFY12 1,796 1,647 148 8.3 68 37 2 46 16 29 1.6 29 1.6 5.9

% chg (yoy) 28.1 28.5 23.6 (30)bp 35.2 31.8 (38.7) (13.8) (7.7) (16.5) (16.5) (16.5)

% chg (qoq) (11.7) (11.5) (14.4) (30)bp 2.3 (12.6) 119.2 (33.9) (38.3) (31.4) (31.4) (31.4)

FY2012 5,907 5,439 468 7.9 230 114 10 133 44 89 1.5 89 1.5 18.0

FY2011 4,698 4,283 415 8.8 145 91 16 15 211 72 139 3.0 139 3.0 27.9

% chg 6.9 7.0 5.9 (90)bp 17.9 5.7 31.7 0.8 4.0 (1.1) (1.5) (1.5)

Exhibit 2: 1QFY2013 Actual vs. Estimates

(` cr) Net Sales EBITDA EBITDAM (%) Interest and Financial Charges PAT
Source: Company, Angel Research

Estimates 1,425 118 8.3 64 20

Actual 1,585 127 8.0 70 20

Variation (%) 11.3 7.4 (30)bp 8.8 1.4

Robust top-line growth

On the top-line front, Simplex reported a robust growth of 28.1% yoy to `1,585cr, higher than our estimate of `1,425cr (consensus `1,472cr). This is the fourth consecutive quarter when the company has reported 25%+ yoy growth on the revenue front. The revenue contribution from the domestic and overseas operations stood at 88% and 12% respectively for the quarter. At the end of the quarter, the companys order book stood at `15,508cr (2.3x FY2013E revenue). Simplex witnessed an order inflow of `1,888cr for the quarter.

August 21, 2012

Simplex Infra | 1QFY2013 Result Update

Exhibit 3: Robust top-line growth

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 Sales (` cr, LHS) Growth (yoy %, RHS) 9.4 9.2 25.7 36.7 31.3 28.1 40.0 35.0 30.0 25.0 20.0 15.0

Exhibit 4: Composition of revenue (1QFY2013, %)

1,167

1,367

1,237

1,322

1,594

1,796

1,585

5.2

10.0 5.0 0.0

Source: Company, Angel Research

Source: Company, Angel Research

Lower EBITDAM and interest burden pull down earnings

The EBITDAM dipped by 30bp yoy to 8.0% for the quarter, marginally lower than our estimate of 8.3%. The interest cost came at `70.0cr, a y-o-y/q-o-q jump of 35.2%/2.3%, and higher than our estimate. The PAT declined by 16.5% yoy to `20.0cr, in line with our estimate and consensus of `20cr and `19cr respectively.

Exhibit 5: EBITDAM trend

160.0 140.0 120.0 100.0 80.0 60.0 40.0 9.2 10.0 12.0 9.5 9.0 8.0 8.3 10.0 8.0 6.0 4.0

Exhibit 6: PAT trend

40.0 35.0 30.0 25.0 20.0 15.0 10.0 1.4 1.1 2.0 1.9 1.6 1.3 2.0 1.5 1.0 0.5 0.0 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 PAT (` cr, LHS) PATM (%, RHS) 2.7 3.0 2.5

8.0

108

137

120

119

127

148

23

37

24

18

18

29

0.0 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 EBITDA (`cr, LHS) EBITDAM (%, RHS)

0.0

0.0

Source: Company, Angel Research

Source: Company, Angel Research

Order book analysis

At the end of the quarter, the companys order book stood at `15,508cr (2.3x FY2013E revenue). Simplex had order inflow of `1,888cr for the quarter. The companys order book comprises 91% domestic and 9% overseas orders.

August 21, 2012

20

20.0

127

2.0

5.0

Simplex Infra | 1QFY2013 Result Update

Exhibit 7: Order inflow for 1QFY13 Segment wise (%)

Exhibit 8: Order backlog Segment wise (%)

Source: Company, Angel Research

Source: Company, Angel Research

Outlook and valuation

Simplex has been performing well on the revenue front since the last four consecutive quarters and has a strong order book (`15,508cr 2.3x FY2013E revenue). However the management has given a guidance of 10-15% on the revenue front for FY2013 owing to the macro challenges faced by the sector. Further, Simplex is a well-diversified player in terms of sectors, geographies and client mix and, unlike its peers, has limited exposure to road BOT assets. Hence, we maintain our Buy view on the stock with a target price of `265.

Investment argument
Diversified play
Simplex is one of the oldest infrastructure companies in India (over eight decades of work log). Since inception, the company has been involved in different segments of the infrastructure sector, from piling (1924) to power (1960), to roads, railways and bridges (1980), and the real estate business (2007). The company has executed ~2,400 projects and is currently involved in >150 ongoing projects in India and abroad. This indicates the company's execution capabilities, apart from qualifying it to successfully execute complex and numerous projects on time. The company is also well spread geographically, with a presence in the Middle-Eastern countries of Qatar, Oman, Dubai and Abu Dhabi and is now venturing into newer territories such as Bangladesh. In terms of its client profile, Simplex has a healthy mix of government and private sector projects. This successful diversification has not only provided the company the experience of executing different and complex projects but has also qualified it to bid for bigger ticket-size projects going ahead.

August 21, 2012

Simplex Infra | 1QFY2013 Result Update

Exhibit 9: Recommendation summary

Company ABL CCCL HCC IRB Infra ITNL IVRCL JP Assoc. L&T Madhucon NCC Patel Engg Punj Lloyd Sadbhav Simplex In. CMP 259 15 17 126 170 44 77 34 41 79 52 136 207 TP Rating FY12 304 Buy 1,495 2,048 3,988 3,131 5,606 4,971 - Neutral - Neutral 166 232 61 91 56 45 Buy Buy Buy Buy Accu. Buy Accu. Top-line (` cr) FY13E 2,029 2,262 4,239 3,964 6,840 5,510 FY14E CAGR (%) 2,310 2,522 4,522 4,582 7,767 6,722 24.3 11.0 6.5 21.0 17.7 16.3 16.7 14.0 17.8 11.4 3.6 11.5 8.5 14.2 23.7 (0.5) (3.7) 14.9 25.6 0.9 4.8 64.3 4.9 1.4 14.9 2.8 9.3 16.8 EPS (`) FY12 FY13E FY14E CAGR (%) 27.1 1.5 (2.3) 15.5 24.4 2.5 4.2 72.1 4.6 3.0 14.0 1.7 7.5 23.4 31.7 2.7 (1.0) 16.9 28.3 4.6 5.0 76.3 4.7 3.5 14.5 3.1 10.4 29.4 15.7 6.5 5.3 125.5 1.9 9.0 (2.6) 58.0 (1.1) 5.7 5.7 32.2 10.9 8.4 6.7 49.4 16.0 22.8 7.0 29.1 5.3 18.6 14.6 12.3 P/E (x) 9.6 9.9 8.1 7.0 17.6 18.2 20.3 7.4 13.4 5.6 30.4 18.1 8.9 8.2 5.6 7.4 6.0 9.7 15.4 19.2 7.3 11.7 5.4 16.7 13.1 7.0 OB/ 2.7 2.2 3.5 2.9 5.6 2.5 3.2 3.5 2.7 2.3 2.9 2.3 FY12 FY13E FY14E Sales (x)

12,853 15,259 17,502 53,171 60,474 69,091 1,802 5,250 3,573 2,676 6,010 2,206 5,804 3,609 2,506 6,732 2,502 6,513 3,836 3,147 7,837

1,467 1,553

- Neutral 182 265 Buy Buy

- Neutral 10,557 11,892 13,116

Source: Company, Angel Research

Exhibit 10: SOTP breakup

Company ` ABL CCCL HCC IRB Infra ITNL IVRCL JP Assoc. L&T Madhucon NCC Patel Engg Punj Lloyd Sadbhav Simplex In. 118 16 (6) 98 19 41 28 1,221 14 25 44 69 83 265 Core Const. % to TP 39 100 (26) 59 8 67 31 79 25 54 46 100 46 100 ` 12 30 2 2 17 Real Estate % to TP 53 33 3 4 18 ` 186 16 64 180 28 4 16 99 Road BOT % to TP 61 73 39 78 50 8 16 54 Invst. In Subsidiaries ` 4 20 332 % to TP 3 33 21 ` 33 33 12 15 19 Others % to TP 14 36 21 34 20 Total ` 304 16 22 166 232 61 91 1,553 56 45 95 69 182 265

Source: Company, Angel Research

August 21, 2012

Simplex Infra | 1QFY2013 Result Update

Company background
Simplex is one of the oldest construction companies in India, based in Kolkata. Over the years, Simplex has diversified across various segments to encash upon the untapped construction opportunity, and it has an excellent track record of achieving the same. The company is present across eight segments buildings (25% of order book), bridges (5%), industrial (10%), marine (1%), pilling (3%), power (23%), rail and roads (24%) and urban infrastructure (8%).

August 21, 2012

Simplex Infra | 1QFY2013 Result Update

Profit & loss statement (Consolidated)

Y/E March (` cr) Net Sales Other operating income Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Inc (incl pft from Ass/JV) (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) (Reported) Fully Diluted EPS (`) (Diluted) % chg
previous year numbers FY2009 4,696 16 4,713 67.8 4,309 2,149 483 1,413 263 404 53.2 8.6 132 272 36.4 5.8 151 46 27.5 166 30.8 (7) 173 49 28.3 124 0.8 123 116 29.3 2.5 24.9 23.5 29.3 FY2010 4,552 12 4,564 (3.1) 4,110 1,856 504 1,472 278 454 12.5 10.0 157 297 9.2 6.5 122 26 13.0 201 20.6 201 71 35.6 129 1.9 127 127 9.2 2.8 25.6 25.6 9.2 FY2011 4,808 16 4,824 5.7 4,404 1,705 2,305 393 420 (7.5) 8.7 96 324 9.1 6.7 148 24 12.0 200 (0.1) 200 74 37.1 126 1.4 125 125 (2.0) 2.6 25.1 25.1 (2.0) FY2012 FY2013E FY2014E 5,983 26 6,010 24.6 5,553 2,306 2,782 464 457 8.7 7.6 119 338 4.3 5.6 231 21 16.2 127 (36.5) 127 45 35.2 82 (1.2) 84 84 (32.9) 1.4 16.8 16.8 (32.9) 6,718 14 6,732 12.0 6,190 2,553 3,116 520 542 18.6 8.1 130 411 21.8 6.1 265 23 13.3 169 33.1 169 55 32.4 114 (1.7) 116 116 38.7 1.7 23.4 23.4 38.7 7,823 14 7,837 16.4 7,182 2,949 3,628 605 655 20.8 8.4 142 513 24.6 6.6 327 28 13.1 213 26.0 213 69 32.4 144 (2.2) 146 146 26.0 1.9 29.4 29.4 26.0

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

August 21, 2012

Simplex Infra | 1QFY2013 Result Update

Balance sheet (Consolidated)

Y/E March SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves & Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Other Long Term Liabilities Long Term Provisions Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Investments Long Term Loans and Adv Other Non-current Assets Current Assets Inventories Sundry Debtors Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets
previous year numbers

FY2009 10 899 909 1 1,220 58 2,189 1,219 208 1,011 14 2 2,946 679 1,682 119 338 127 1,784 1,162 2,189

FY2010 10 968 978 5 1,302 88 2,374 1,277 289 988 19 3 3,125 671 1,806 110 398 140 1,760 1,364 2,374

FY2011 FY2012 FY2013E FY2014E 10 1,078 1,088 6 1,632 138 7 2,871 1,509 384 1,125 27 23 46 142 3,634 730 2,317 102 452 33 2,126 1,508 2,871 10 1,197 1,207 6 2,094 195 10 8 3,519 1,804 525 1,279 44 54 33 141 4,735 879 1,689 73 596 1,498 2,767 1,968 3,519 10 1,302 1,312 6 2,511 195 10 8 4,041 1,979 656 1,323 49 159 33 141 5,435 1,146 1,896 70 646 1,678 3,099 2,336 4,041 10 1,436 1,446 6 2,954 195 10 8 4,618 2,154 798 1,356 54 264 33 141 6,379 1,365 2,208 111 741 1,953 3,608 2,771 4,618

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

August 21, 2012

Simplex Infra | 1QFY2013 Result Update

Cash flow statement (Consolidated)

Y/E March (` cr) Profit before tax (excluding MI) Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances
previous year numbers FY2009 173 79 358 46 30 (181) (408) 8 46 (355) 444 12 100 532 (4) 123 119 FY2010 201 92 314 26 46 (93) (118) (1) 26 (93) 107 12 82 177 (9) 119 110 FY2011 199 96 152 24 16 104 (241) (20) 24 (237) 330 11 (193) 125 (8) 110 102 FY2012 FY2013E FY2014E 128 119 489 21 45 (307) (312) (31) 21 (322) 462 12 150 601 (29) 102 73 171 130 370 23 55 (147) (179) (105) 23 (262) 417 12 405 (3) 73 70 215 142 394 28 69 (134) (180) (105) 28 (257) 443 12 431 41 70 111

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

August 21, 2012

Simplex Infra | 1QFY2013 Result Update

Key Ratios Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Order Book to Sales Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROACE (Pre-tax) Angel ROIC (Pre-tax) ROAE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Wcap cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage
previous year numbers 1.2 2.7 1.8 1.2 2.6 2.4 1.4 3.6 2.2 1.7 4.4 1.5 1.9 4.5 1.6 2.0 4.3 1.6 4.8 45 110 116 70 3.7 54 139 141 92 3.5 53 156 86 101 3.6 49 122 83 100 3.6 55 97 92 113 3.8 58 96 91 115 14.6 15.6 14.0 13.0 13.7 13.5 12.3 12.9 12.1 10.6 10.9 7.3 10.9 11.1 9.2 11.8 12.1 10.6 5.8 0.7 2.7 11.2 11.0 1.0 11.4 6.5 0.6 2.1 8.8 6.2 1.2 11.9 6.7 0.6 1.9 8.1 6.3 1.3 10.4 5.6 0.6 1.9 7.0 8.0 1.5 5.5 6.1 0.7 1.8 7.5 7.8 1.8 7.0 6.5 0.7 1.8 8.2 8.1 1.9 8.3 24.9 23.5 39.3 2.0 183 25.6 25.6 44.2 2.0 197 25.1 25.1 44.5 2.0 219 16.8 16.8 40.8 2.0 243 23.4 23.4 49.6 2.0 264 29.4 29.4 58.0 2.0 291 8.8 5.3 1.1 1.0 0.5 5.3 1.0 2.1 8.1 4.7 1.1 1.0 0.5 4.9 0.9 2.5 8.3 4.7 0.9 1.0 0.5 6.1 0.9 3.1 12.3 5.1 0.9 1.0 0.5 6.7 0.9 2.8 8.9 4.2 0.8 1.0 0.5 6.4 0.9 2.7 7.0 3.6 0.7 1.0 0.5 5.9 0.8 2.5 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

August 21, 2012

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Simplex Infra | 1QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Simplex Infra No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

August 21, 2012

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