CRISIL maintains valuation grade of 5/5 to C&C Construct

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CRISIL maintains valuation grade of 5/5 to C&C Construct

CRISIL Research has come out with its report on C&C Constructions. The research firm has maintained the fundamental grade of 2/5 to the company in its February 10, 2012 report.

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CRISIL Research has come out with its report on C&C Constructions . The research firm has maintained the fundamental grade of 2/5 to the company in its February 10, 2012 report.

C&C Constructions Ltd's (C&C's) Q2FY12 (June year-ending) consolidated results were below CRISIL Research's expectations. Revenue registered strong growth due to timely execution of projects and toll revenue from the Kurali- Kiratpur BOT project, which became operational in September 2011. However, EBITDA margin declined by 610 bps y-o-y to 14.8% and was much below our expectations. Working capital has stretched a lot, resulting in higher debt and interest cost which has pulled down profitability further and reported loss. We believe that amortisation of toll rights for Kurali-Kiratpur might have impacted profitability. Order intake during the quarter was sluggish as the company has not received any major order.

C&C's current order book is valued at ~Rs 50 bn (3.6x TTM revenue). We maintain our fundamental grade of 2/5. We will revise our estimates downwards post interaction with the management.

Q2FY12 result analysis
• Consolidated Q2FY12 revenues increased by 32.6% y-o-y (40% q-o-q) to Rs 3,552 mn due to timely execution of projects and toll revenue from the Kurali-Kiratpur BOT road project, which became operational in September 2011.

• EBITDA margin declined by 610 bps y-o-y to 14.8%. Post our interaction with the management we will get more clarity on the reason for the sharp decline in margins.

• Higher working capital requirement led to high debt and interest cost, which pulled down profitability. The company reported loss of Rs 48 mn in this quarter compared to a profit of Rs 39 mn in Q2FY11.

Key development
• During the quarter, promoter pledging has decreased from 45.2% in September 2011 to 41.9% in December 2011.

Valuations: Current market price has strong upside
We continue to value C&C based on the sum-of-the-parts method. Our fair value is Rs 144 per share. We may revise it downwards post our interaction with the management. Based on the current market price, our valuation grade is 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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