Buy Madhucon Projects; target Rs 107: PINC Research

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Buy Madhucon Projects; target Rs 107: PINC Research

PINC Research is bullish on Madhucon Projects (MPL) and has recommended buy rating on the stock with a target price of Rs 107 in its February 14, 2012 research report.

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PINC Research is bullish on Madhucon Projects (MPL) and has recommended buy rating on the stock with a target price of Rs 107 in its February 14, 2012 research report.

"Madhucon Projects (MPL) positively surprised with sales growth of 77.5% YoY to Rs6.3bn (PINCe Rs4.8bn and consensus Rs4.5bn). However, operating margin was lower at 8.4%, a dip of 429bps YoY, due to higher purchasing cost as new projects came into execution and ramp-up in power projects. Another surprise was lower interest cost at Rs298mn down 6.4% due to reduction and restructuring of debt. PAT came in at Rs75mn (PINCe Rs83mn) and consensus was at Rs53mn. Strong order inflow during the quarter and better execution has led to increase our topline estimate by 8.9% for FY13E and PAT by 53.9% to Rs480mn."

"Sales was driven by Phase II power project, which contributed 42.9% of revenue, followed by Phase I at 23.2% (Phase I is completed), roads at 18.7%, Building, Irrigation and mining at 6.9%, 5% and 2.9% respectively. Phase II order will get exhausted by Q1FY13, which currently stands at ~Rs2.6bn. This quarter witnessed a strong order inflow to the tune of Rs12.2bn, of which Rs6bn came from own BOT project (Vijaywada-Machlipatnam), a mining project from Bharat Coaking Coal worth Rs4.2bn and an irrigation project of Rs2bn from Sardar Sarovar Narmada Nigam. Now the order book stands at Rs68.7bn (3.4x FY12E sales), which is largely contributed by road project at 55% followed by irrigation at 23%. Toll collection for four operational road projects has increased by 12.5% to Rs4.5mn vs Rs4mn last quarter."

"MPL has received LoI to set up 300MW (2x150) thermal power project in Indonesia. This project is located close to their coal mine at Dawas, which would help in easy procurement and transport of coal. MPL will hold 65% stake, while the rest will be owned by promoter group companies. MPL is also in talks to sign Power Purchase Agreement (PPA) with PT.PLN. Better execution in the quarter, coupled by good order inflow has improved visibility for MPL standalone business. Moreover, phase II power project seems on schedule. For FY13E we have increased our topline by 8.9%, margin by 20bps and a marginal decline in interest cost (due to lower debt) has increased our PAT estimate by 53.9% to Rs480mn. The key for MPL, going forward, will be fructification of dilution at Madhucon Infrastructure level and reduction in debt in the standalone entity; else it may take more time than anticipated to attain the intrinsic value of its assets. We maintain our 'BUY' recommendation on the stock with a target price of Rs 107," says PINC Research report.

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To read the full report click on the attachment