CRISIL retains valuation grade of 5/5 to Marg

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CRISIL retains valuation grade of 5/5 to Marg

CRISIL Research has come out with its report on Marg. The research firm has maintained the fundamental grade of 3/5 to the company in its January 27, 2012 report.

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CRISIL Research has come out with its report on Marg . The research firm has maintained the fundamental grade of 3/5 to the company in its January 27, 2012 report.

Marg's Q3FY12 standalone results were slightly below CRISIL Research's expectations. Our back-of-the-envelope calculation shows consolidated revenues as well as earnings were also marginally below expectations. We remain positive on the prospects of Marg's Karaikal port (Tamil Nadu), but expect its real estate business to face headwinds in the current macroeconomic environment. We will get further clarity and may lower our estimates after interaction with the management. We maintain the fundamental grade of 3/5.

Q3FY12 standalone result analysis
• Revenues grew by ~52% y-o-y to Rs 4,830 mn driven by 55% y-o-y growth in the EPC business. We will get more insight on the contribution from the internal and external EPC businesses, post our management discussion. Last quarter, the internal EPC business contributed 66%, and the balance was from the external EPC business.

• EBITDA margin declined by 178 bps y-o-y to 8.4%. The decline was largely driven by ~58% y-o-y increase in raw material cost.

• PAT margins declined ~120 bps y-o-y to 3.8% (-ve 24 bps q-o-q) because of EBITDA margin contraction. EPS was Rs 4.8 vs. Rs 4.2 in Q3FY11.

• The current EPC order book is valued at Rs 32.5 bn with external orders comprising ~35%.

Analysis of subsidiaries' performance
Karaikal port's revenue grew ~34.0% y-o-y (up ~2.5% q-o-q) to Rs 579 mn. The multi-cargo traffic stood at 1.45 MMT that grew ~32% y-o-y and was in line sequentially. EBITDA margin increased significantly to ~44.0% from 40.7% in Q3FY11 and 36.5% in Q2FY11. We attribute the margin expansion largely to growth in traffic as realisations have increased by just ~2% y-o-y. We will provide more insights on the port and the SEZ business post our management discussion.

Valuations: Current market price has strong upside
We continue to value Marg based on the sum-of-the-parts method and arrive at a fair value of Rs 267 per share. Given the current market price, we retain the valuation grade of 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.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"