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Mixed quarter; RM inflation dents margins

Our view

ITD cementation (ITCE) reported a mixed set of numbers, with a strong 19% YoY revenue growth at Rs11.7bn led by robust execution. EBITDA margins remained under pressure owing to elevated commodity prices and provisioning of Rs300mn for Bangalore metro project. Order inflow came it at all time high of Rs78bn while the order book as on 4QFY22 stands at 115bn providing revenue visibility for next 3‐4 years. With strong order book position, healthy bid pipeline (Rs150bn) and improved liquidity position, management guided for 20‐25% revenue growth in FY23E.

ITCE being a dominant player in urban infra space with MNC parentage, we remain positive on its a) healthy and diversified order book (Rs115bn as on 4QFY22) b) strong execution capabilities c) lean balance sheet (Gross D/E of 0.5x) and d) advanced technology and skilled labour. We have revised our revenue estimates for FY23E and FY24E by 7% / 10% looking at strong momentum in execution. We expect ITCE to post a revenue/EBITDA CAGR of 15%/30% over FY22‐FY24E. We maintain ‘BUY’ rating on the stock with a TP of Rs101, assigning a 10x multiple to its FY24E EPS of Rs10.1.

Result Highlights

* For Q4FY22, ITD’s revenues grew 19% YoY to Rs11.7bn (11% above our estimates). Execution was better than our estimate due to strong execution in its key projects.

* The company reported an EBITDA of Rs838mn (below YSec of Rs1.1bn) with EBITDAM contracting 443bps to 7.1% (below our and street estimates of 10.6%/9.6%). The margins contracted on account of steep rise in raw material prices and other expenses..

* On the bottom‐line front, adj. PAT came in at Rs165mn (below our estimates of Rs467mn), owing to subdued operating performance.

* During the quarter, ITCE bagged orders worth Rs9bn taking cumulative order inflows in FY22 to Rs75bn.  

* At the CMP, the stock trades at a P/E of 10.1x FY23E and 5.9x FY24E EPS.

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