Infra stocks results preview for Q3FY12: KRChoksey

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Infra stocks results preview for Q3FY12: KRChoksey

KRChoksey has come with its quarterly earning estimates for Infrastructure sector.

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KRChoksey has come with its quarterly earning estimates for Infrastructure sector.

The overall data for projects' financial closure has declined by 43% to Rs 803 bn (QoQ) for Q1FY12. Sectors like Road & T&D has shown encouraging awarding activities but power, oil & gas and industrial capex are muted in terms of order inflows in FY12E. The ordering activity of 5,600 KM is awarded till date out of ~7,300 KM planned by NHAI; PGCIL has also awarded Rs 120 bn orders till date.

• Sales growth: BOT developers revenue will grow by 25% in Q3FY12, primarily led by high construction revenue, however toll revenue will grow by ~10% due to no increase in toll tariffs
• Margin trend: Stable raw material prices helps to sustain margins but due to change in revenue mix aggregate margins are expected to fall by 360
bps
• Profitability: The aggregate profitability is expected to flat 4.8% YoY due to sharp increase in interest costs because of increased leverage and rising interest costs.
• Order Inflow: Order Inflows are expected to be muted for most players with overall expected order book growth of 6% YoY

Factors to watch in the Q3FY12E result
• High working capital cycle of the companies due to longer execution cycle projects (eg: Power, Metro projects) and high loans & advances
• Land acquisition and Environmental clearance will impact the future order book of the construction companies
• Further increase in interest rates will impact the bottomline of the infra companies

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