REDUCE
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Infrastructure 359 0.35 93/17 33,470 2 17,805 5,361 CCON.BO CCCL@IN
`19 `17
12 Months
For CCCL the run of dismal performances continue. Though the companys performance on the revenue front was higher than our expectations; however, it was shocking, to say the least, at the earnings front, due to a substantial dip in EBITDAM and higher than anticipated interest cost. We are revising our estimates further downwards for FY2012 and FY2013 and are also assigning lower target PE multiple (7x from earlier 8x) to factor in the poor performance during the quarter, persistent weakness in business environment and expected poor performance in second half of the fiscal. Hence, we downgrade the stock to Reduce from Neutral with a Target Price of `17. EBITDAM take a plunge + high interest cost Earnings in red: For 2QFY2012, CCCLs top line grew by 9.5% yoy to `535.8cr (`489.5cr), against our estimate of `465.0cr. On the EBITDAM front, the company posted abysmal margin of 1.4% (7.8%), registering a decline of 640bp yoy against our expectation of 261bp. On a sequential basis as well, CCCLs margin witnessed a 340bp decline. The decline in margin can be attributed to commodity price pressures and increased employee and labor costs. Therefore, on the bottom-line front, the company reported loss of `18.7cr in 2QFY2012 vs. profit of `13.7cr in 2QFY2011, against our expectation of `1.4cr profit, mainly on account of lower margin and higher interest cost (`17.2cr, a jump of 42.1%/11.3% yoy/qoq). Outlook and valuation: CCCL has been posting erratic numbers on the EBITDAM front and consequently has been performing poorly on the earnings front as well since the last few quarters. We have revised our numbers and PE multiple downwards owing to the reasons mentioned above. Our revised target price for CCCL is `17/share based on 7.0x on its FY2013E EPS of `2.4; implying a downside of ~11% from current levels hence, we downgrade the stocks rating to Reduce from Neutral.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.7 13.8 13.4 22.1
3m
1yr
FY2010 1,976 7.3 91.6 26.6 5.0 9.1 3.9 16.6 19.3 0.6 0.3 2.9
FY2011 2,199 11.3 46.9 (48.8) 2.5 7.0 7.7 7.7 13.2 0.6 0.3 4.6
FY2012E 2,362 7.4 (6.6) (0.4) 3.7 (1.1) 6.0 0.6 0.4 10.0
FY2013E 2,646 12.0 43.7 2.4 5.9 8.2 7.0 10.5 0.6 0.4 6.0
Shailesh Kanani
022-39357800 Ext: 6829 shailesh.kanani@angelbroking.com
Nitin Arora
022-39357800 Ext: 6842 nitin.arora@angelbroking.com
2QFY12 535.8 528.3 7.5 1.4 17.2 3.6 1.5 (11.8) 4.2 (16.0) 2.8 (18.7) (3.5) (1.0)
2QFY11 489.5 451.3 38.2 7.8 12.1 3.1 1.3 0.7 25.0 8.5 16.5 2.7 13.7 2.8 0.7
1QFY12 506.9 482.3 24.6 4.8 15.5 3.2 1.2 7.0 4.1 2.9 2.4 0.6 0.1 0.0
% Chg (yoy) 9.5 17.1 (80.3) (640)bp 42.1 15.4 9.4 (51.4) -
% Chg (qoq) 5.7 9.5 (69.3) (340)bp 11.3 11.8 25.9 1.2 -
1HFY12 1042.7 1010.6 32.1 3.1 32.7 6.9 2.6 (4.8) 8.3 (13.0) 5.1 (18.2) (1.7) (1.0)
1HFY11 997.5 917.2 80.2 8.0 22.7 6.0 2.7 1.6 55.9 18.8 37.1 3.7 33.4 3.4 1.8
Projects update
On the Chennai Airport project, CCCL booked revenues of `138cr during the quarter. The company is hopeful of completing the balance project (~`200cr) by December 2011.
On the 5MW solar power plant front, CCCL expects to achieve completion by January 2012. However, the Delhi car park project has not begun yet due to approval pending from Delhi Municipal Corporation, which is expected soon.
4.5
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
1QFY12
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
Earnings in red
The major disappointment came on the margin front, as the company posted abysmal EBITDA margin of 1.4% (7.8%), registering a drop of 640bp yoy against our expectation of 261bp. On a sequential basis as well, the companys margin witnessed a decline of 340bp. The margin decline can mainly be attributed to commodity price pressures (steel, cement and sand), increased employee cost (one-time loyalty bonus and increments) and high labor cost on account of engagement of specialized agencies. Moreover, CCCL still has ~`1,300-1,400cr worth of (low-margin legacy orders + fixed price contracts), which will keep CCCLs EBITDA margin under pressure for another four quarters. Hence, we are further reducing our EBITDAM estimates to 3.7% (6.3%) and 5.9% (7.3%) for FY2012 and FY2013, respectively. Interest cost has increased to `17.2cr (`12.1cr), registering a jump of 42.1% yoy and 11.3% sequentially. This is on account of increased debt levels by `87cr (to fund working capital requirements) during the quarter and a high interest rate scenario. Against this backdrop, the company posted loss of `18.7cr vs. profit of `13.7cr in 2QFY2011, against our expectation of `1.4cr profit.
4QFY11
2QFY12
1QFY12
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
2QFY12
2QFY09
3QFY09
4QFY09
4QFY11
1QFY12
2QFY12
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
(3.5)
Change in estimates
We are revising our estimates further downwards for FY2012 and FY2013 to factor in the poor performance during the quarter, persistent weakness in business environment and expected poor performance in second half of the fiscal. On the margin front, we are factoring in a dip in EBITDAM to 3.7% (6.3%) and 5.9% (7.3%) for FY2012 and FY2013, respectively, as the company has acknowledged that margin pressure is likely to continue for the next four quarters due to the above-mentioned reasons. Further, with rising interest cost and dismal margin, our bottom-line estimates have been revised downwards to loss of `6.6cr vs. profit of `27.8cr for FY2012 and profit of `43.7cr (`65.8cr) for FY2013.
FY2013 (260)bp (123.8) 2,646.1 7.3 65.8 2,646.1 5.9 43.7 (140)bp (33.7)
Revised estimates Variation (%) Earlier estimates Revised estimates Variation (%) 2,362.1 3.7 (6.6)
35.3
27.8
17.5
19.3 13.2 10.5 6.0 7.7 FY2011 RoACE (%) FY2012E (1.1) 7.0 FY2013E
14.9
16.6
(0.4) 2.4
13,832 15,092 17,683 9,585 10,992 5,755 2,602 5,286 3,272 1,959 4,910 6,689 2,865 6,178 3,587 2,512 6,484
- Neutral
- Neutral
1,413 1,714
10
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 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) W. cap cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage 0.1 0.2 14.2 0.1 0.5 6.5 0.3 0.9 5.2 0.6 2.3 2.8 0.8 5.9 1.0 0.9 3.7 1.7 19.2 120 2 77 62 14.4 143 2 93 73 11.3 169 2 100 97 10.7 185 2 94 121 10.1 193 1 95 136 10.0 189 1 93 133 35.3 43.6 27.8 17.5 20.8 14.9 19.3 23.3 16.6 13.2 15.0 7.7 6.0 6.4 (1.1) 10.5 11.2 7.0 11.1 0.7 3.9 31.3 6.9 0.1 33.7 6.5 0.7 3.2 13.6 7.5 0.1 14.3 8.5 0.6 2.7 15.0 7.8 0.2 16.5 6.3 0.6 2.4 9.4 8.0 0.4 9.9 3.0 0.7 2.1 4.1 9.4 0.7 0.5 5.2 0.7 2.2 7.6 8.6 0.9 6.6 6.2 4.8 5.1 0.5 24.6 3.9 3.9 4.4 0.5 27.9 5.0 5.0 5.6 0.5 31.9 2.5 2.5 3.3 0.5 34.0 (0.4) (0.4) 0.5 0.6 33.0 2.4 2.4 3.4 0.6 34.7 4.0 3.8 0.8 2.6 0.3 2.3 0.7 5.0 4.4 0.7 2.6 0.2 3.3 0.6 3.9 3.5 0.6 2.6 0.3 2.9 0.5 7.7 5.9 0.6 2.6 0.3 4.6 0.6 36.8 0.6 2.8 0.4 10.0 0.7 8.2 5.8 0.6 2.8 0.4 6.0 0.7 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
11
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
CCCL No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns):
12