Buy Ceigall India Ltd For Target Rs. 370 By JM Financial Services
Growth hinges on timely receipt of appointed dates
Ceigall India’s (CIL) 4Q25 PAT at INR 696mn was sharply below JMFe of INR 890mn due to lower margins and higher interest costs despite higher other income. EBITDA margins at 11% (JMFe: 13%) declined by 320bps YoY on revised base (adjusted for bonus/royalty income of INR 117mn in 4Q24) due to lower gross margins. Gross debt increased sharply from INR 4.3bn in Dec-24 to INR 6.4bn in Mar-25 due to due to rise in NWC levels and start of new projects. Order backlog stood at INR 108bn (3.2x TTM revenues). While only 50% of current backlog is under execution, executability should improve to 92% by Sept-25. CIL has guided for revenue growth of 10-15% despite robust order backlog, given the delay in appointed dates for HAM projects. CIL expects pure EPC EBITDA margins (ex of bonus and royalty) of 11-12% for FY26E. We see sharp EPC cut of 15%/14% in FY26/27E factoring in lower revenue/margins. We expect strong earnings growth of 27% CAGR over FY25-27E. CIL is currently trading at 13.7x/11x FY26/27E EPS. We value the EPC business at 13x FY27E EPS (earlier 14x FY27E EPS) to arrive at SoTP based price target of INR 370. Maintain Buy.
* PAT below JMFe due to lower margins and higher interest cost: Revenue grew 16% YoY to INR 9.9bn (JMFe: INR 10.3bn). EBITDA declined 17% YoY to INR 1.1bn (JMFe: INR 1.3bn). EBITDA margins at 11% (JMFe: 13%) declined by 320bps YoY on revised base (adjusted for bonus/royalty income of INR 117mn in 4Q24) due to lower gross margins. Interest cost rose sharply by 55% YoY/98% QoQ to INR 205mn (JMFe: INR 112mn) due to higher debt levels. Other income increased by 2.7x YoY to INR 204mn (JMFe: INR 98mn). Adjusted PAT declined by 20% YoY to INR 696mn (JMFe: INR 890mn) due to lower margins and higher interest costs despite higher other income.
* Robust order backlog; executability to improve by Sept-25: CIL won inflows of INR 41bn in FY25. Order backlog moderated QoQ to INR 108bn (3.2x TTM revenues) as CIL removed EPC project of INR 10.7bn due to non-availability of land. While only 50% of current backlog is under execution, executability should improve to 92% by Sept-25. CIL has bid for orders worth INR 170bn across verticals like highways, railways, metro, irrigation and urban development where results are awaited.
* Guides for 10-15% revenue growth and order inflows of INR 55bn for FY26E: CIL has guided for revenue growth of 10-15% with order inflows of INR 55bn in FY26E. It expects EPC EBITDA margins of 11-12% for FY26E. For its HAM portfolio of 8 assets (ex of Moga-Barnala), total equity requirement is c.INR 12bn of which INR 4.1bn is infused till Mar-25 while remainder equity is to be invested over the FY26-28E.
* Maintain BUY with revised price target of INR 370: Given the delay in ADs for HAM projects and cut in margin guidance, we have cut EPS by 15%/14% in FY26/27E. Having said that, we expect EPS CAGR of 27% over FY25- 27E backed by strong backlog. We expect balance sheet to remain lean with net debt/equity of (0.1x) and net debt + mobilization advances/EBITDA of (0.3x) in Mar’27E. Valuation at 13.7x/11x FY26/27E EPS (prior to adjustment for value of assets) is attractive. We value the EPC business at 13x FY27E EPS (earlier 14x FY27 EPS) and HAM portfolio on P/B basis to arrive at an SOTPbased revised price target of INR 370. Maintain BUY.
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