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Mixed quarter; RM inflation dents margins

Our view

ITD cementation (ITCE) reported a mixed set of numbers, with a strong 28% YoY revenue growth at Rs10bn led by robust execution. EBITDA margins remained under pressure owing to elevated commodity prices and low margin Bangalore metro project while Adj. PAT came at Rs200mn (incl one off profit in share of JV of R250mn). FY23E revenue guidance remained unchanged at 25% YoY growth, with margin in high single digit, and as commodity inflation is expected to cool off in the coming quarters, margin is expected to move into lower double digits in FY24E. The OB stands at Rs217bn and is well-diversified, providing a natural hedge from a slowdown in any particular business segment. The net D/E as of 2QFY23 stood comfortable at 0.29x, providing room for further growth.

ITCE being a dominant player in urban infra space with MNC parentage, we remain positive on its a) healthy and diversified order book (Rs217bn as on 2QFY23) b) strong execution capabilities c) lean balance sheet (D/E of 0.3x) and d) advanced technology and skilled labour. We expect ITCE to post a revenue/EBITDA CAGR of 15%/27% over FY22?FY25E. We have introduced our FY25E estimates with revenue / PAT growth of 13% / 30% YoY owing to healthy order book. We maintain ‘BUY’ rating on the stock with a TP of Rs138, assigning a 10x multiple to its FY25E EPS of Rs13.8.

Result Highlights

? For Q2FY23, ITD’s revenues grew 27% YoY to Rs10.3bn (our estimates of Rs9.5bn) on the back of robust execution in its key projects.

? The company reported an EBITDA of Rs597mn (below YSec of Rs692mn) with EBITDAM contracting 44bps to 5.8% (below our / street estimates of 7.3% / 8.5%). The margins contracted on account of higher RM cost.

? On the bottom-line front, adj. PAT came in at Rs200mn (above our estimates of Rs38mn), mainly on account of profit in share of R250mn.

? At the CMP, the stock trades at a P/E of 10.5x FY23E and 8.1x FY24E EPS

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