CRISIL maintains fundamental grade of 3/5 to Spanco

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CRISIL maintains fundamental grade of 3/5 to Spanco

CRISIL Research has come out with its report on Spanco. The research firm has assigned a valuation grade of 5/5 to the company and maintained the fair value of Rs 289 per share, in its August 16, 2011 report.

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CRISIL Research has come out with its report on Spanco . The research firm has assigned a valuation grade of 5/5 to the company and maintained the fair value of Rs 289 per share, in its August 16, 2011 report.

Spanco Ltd's June 2011 standalone revenues were slightly below CRISIL Research's expectations. The q-o-q revenue growth was muted despite the commencement of power distribution in Nagpur. Decline in EBITDA and PAT margins was in line with expectations due to start-up costs at the Nagpur project. Post interaction with the management, we may revisit our estimates and fair value. We maintain the fundamental grade of 3/5.

June 2011 standalone result analysis
• Spanco's standalone revenues de-grew by 4% q-o-q (up 40% y-o-y) to Rs 4,362 mn. Spanco commenced power distribution in Nagpur in May and booked two months of collections in this quarter. The q-o-q decline was a result of lesser revenue booking from its other segments (government, telecom and R-APDRP projects).

• EBITDA margin declined by 89 bps q-o-q to 12.2% (down 127 bps y-o-y) due to higher start-up costs at the Nagpur power distribution project.

• PAT margin declined by 127 bps q-o-q (down 76 bps y-o-y) to 3.8% due to a decline in revenues and EBITDA margin. EPS for June 2011 was Rs 6.0 compared to Rs 8.3 in March 2011.

Valuations: Current market price has strong upside
We continue to use the sum-of-the-parts method to value Spanco. We have used the price multiple method to value the company except the Nagpur DF and MP border projects, which have been valued using the discounted cash flow method. We maintain our fair value of Rs 289 per share and valuation grade of 5/5, says CRISIL Research report.

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"

To read the full report click on the attachment