Hold Orbit Corp; target of Rs 50: PINC Research

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Hold Orbit Corp; target of Rs 50: PINC Research

PINC Research has recommended hold rating on Orbit Corporation with a target of Rs 50, in its August 10, 2011 research report.

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PINC Research has recommended hold rating on Orbit Corporation with a target of Rs 50, in its August 10, 2011 research report.

"Orbit Corp's (ORB) net sales for Q1FY12 decreased by 29% YoY to Rs851mn, 5% lower than our estimate of Rs900mn. The EBIDTA margin declined to 24.5% from 32% in Q1FY11, a 746bps fall YoY on account of rise in construction cost of 7-8% and cost overrun in one of the projects. We maintain a HOLD on ORB because: 1)Sales booking have significantly decreased which may impact cash inflows and this scenario is likely to continue for rest of H1FY12. 2) Delays in execution of projects on account of approval concern may delay cash inflows from earlier projects. 3) No immediate relief w.r.t clearances (approval process, delay in acquisition) of projects in Napensea road (NS Block, Kilachand house). The stock has already discounted the launch of Napensea road and appreciation in stock is likely to come post successful launches (Table-1) in H2FY12, receipt of money for Ocean Parque and settlement of Kilachand House."

"Sales during the quarter fell again to 9,958sq ft from 11,249 sq ft in Q4FY11. Revenue was largely recognized from Orb Annex (Rs501mn), Orbit Residency Park (Rs173mn) and Orbit Haven (Rs87mn). Revenue from sales fell significantly to Rs117mn as compared to Rs504mn in Q4FY11. We expect this trend to continue in H1FY12 thereby giving poor fresh cash inflow visibility. EBITDA margins in the quarter fell to 24.5% from 48.1% in Q4FY11. Margins fell basically because of rise in construction costs of ~7-8% during the quarter as well as cost overrun in Orbit WTC of ~ Rs80mn."

"The company has an aggressive launch plan for FY12 which includes Lalbaugh, Santacruz and Napensea road. The company should launch more projects in FY12 in order to keep the cash inflow intact. The debt levels of the company is unlikely to come down further in FY12 unless we see cash inflows from new launches and receipt from Ocean Parque. We continue to maintain our 'HOLD' recommendation on the stock with a target price of Rs 50 after assigning a 30% discount to NAV as we see no near term triggers for the stock," says PINC Research report.

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To read the full report click on the attachment