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A torrid quarter
We maintain BUY on SEL with a reduced SOTP of Rs 353/sh (vs Rs 382 earlier). We value SEL’s EPC business at 15x FY21E EPS and assign a 20% hold co discount to SIPL stake’s market value. Owing to delay in Appointed Dates (AD) we have downgraded FY20/21E standalone EPS by 15.1/9.4%.
HIGHLIGHTS OF THE QUARTER
* 4QFY19 a big miss:
4QFY19 Rev/EBITDA/APAT was 22/18/68% below estimate (~21% below guidance). FY19 was a miss both in terms of inflows (~61% below original guidance) and top line (13% below original guidance). Even though NHAI tendering was virtually non-existent over 9MFY19, SEL failed to add any major projects in the last leg of tendering witnessed in 4QFY19. The MSRDC and KSHIP HAM wins though have provided some respite.
* Only ~85bn order book firing currently:
5 HAM projects worth ~Rs 41.8bn are yet to start. Additionally work is progressing slowly in the Maharshtra EPC project (Rs 16.2bn). We have downgraded our top line estimate by 9/7% in FY19/20E to factor in the delay.
* Appointed Dates (AD) delayed:
FC for 3 NHAI HAMs is done and Appointed Dates (ADs) will be taken at ~80% land availability. The Tumkur and Gadag projects are facing delays. Full scale execution in SEL can be witnessed only post 1HFY20E. Further ~Rs 750/550mn in Rampur Kathgodam/ Uda Kodinar have got descoped from the backlog.
* SIPL deal close to attaining finality:
While management refused to divulge anything substantial on the asset monetization deal (which has been going on for a while now), they maintained that the deal is virtually done and the lenders (~12-13) and NHAI are being approached for approvals.
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HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475
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