Despite COVID-19 impact,ITD’s reported strong 4QFY20 execution leading to Rev/EBIDTA beat of 25/54%. ITD APAT stood at Rs 356mn vs. our estimate of Rs 35mn. With robust FY20 order inflow/backlog of Rs 60/107bn, FY21should have been a strong year for ITD with Rev of Rs 40bn+. Covid-19 has resulted in migrant workers going home and construction work coming to halt. At best we expect ITD to record 50% Rev in 1QFY21 (Rs 3.5bn) with gradual rampupto Rs 10bn by 4QFY21E. Though ITD has taken cost control measures, negative oplev in 1HFY21 will result in PAT breakeven for FY21E. Weak 1HFY21 will limit further re-rating whilst stable BS with net D/E of 0.2x will limit correction. Maintain ADDwith an increased TP of Rs 54/sh (8x Mar-22E EPSvs Rs44/sh earlier).TP increase driven by 22.3% FY22E EPS upgrade.
* Strong 4QFY20 impacted by one off: During 4QFY20, ITD has written offRs 409mn of receivable and unbilled revenue for the ILFS Power Plant project in Cuddalore. With ILFS moving into NCLT, ITD auditors advised to take write off. ITD will pursue the claims with new buyer (post NCLT process). The jetty is crucial for linking imported coal to power plant and currently coal is transported from Chennai port by road to power plant. Reported loss stood at Rs 54mn and APAT at Rs 356mn.
* Otherwise strong FY21E,impacted by COVID headwinds:ITD has won new orders worth Rs 60bn (FY20) taking total order book to Rs 107bn. Bid pipelineis strong at Rs 240-250bn with 20%+ marine projects up for grabs. ITD stayed away from giving inflow guidance but expects revenue run rate target of Rs 10bn/qtr from 2QFY21to shift to 4QFY21.Labor at site has reduced from peak of 18,000 to 8,500 and reverse migration is expected to normalize by Aug-20 end as inter Statetransportation improves.Labor migration and large presence in urban cities viz. Mumbai, Pune, Nagpur, Bengaluru, Delhi and Kolkata would severely impact FY21E execution.
* Net debt reduces by Rs 2.4bn YoY, NWC days decreaseto 68:ITD's consolidated gross/net debt decreased to Rs 4.6/1.8bn vs Rs 5.3/4.2bn YoY. Bengaluru elevated metro projectdebt reduced from Rs 2.3bn to Rs 1.6bn. This project is expected to get completed by Dec-20/June-21 and WC debt will gradually unwind. Robust clientpayments/advanceshas resulted in NWC days decreasing to 68days vs114days YoY.Consolidated net D/E standsat 0.2xvs 0.4x YoY.
* Limited downside:ITD lacks near term triggers for upsides on back of weak 1HFY21. Stable balance sheet and strong order book will limit downside. We maintain ADD.Key risks (1) High competitive intensity in marine segment with competition from L&T, (2) Sustained cost overruns in projects, and (3) BS and NWC deterioration.
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://www.hdfcsec.com/article/disclaimer-1795
SEBI Registration number is INZ000171337
Above views are of the author and not of the website kindly read disclaimer