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Published on 13/07/2020 11:27:00 AM | Source: HDFC Securities Ltd

Add ITD Cementation India Ltd For The Target Rs.54 - HDFC Securities

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Lacking triggers

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. 

 

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