Sell CCCL; target of Rs 38: Angel Broking

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Sell CCCL; target of Rs 38: Angel Broking

Angel Broking is bearish on Consolidated Construction Consortium (CCCL) and has recommended sell rating on the stock with a target of Rs 38 in its April 29, 2011 research report.

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RELATED NEWS Sell GMDC; target of Rs 130: Aditya Birla Money Sell Bharti Airtel; target of Rs 350: Aditya Birla Money Buy MTNL; target of Rs 50: IIFL ALSO READ See previous views by Angel Broking See what other Experts & Brokerages are saying about Consolidated Const See messages about Consolidated Const Consolidated Co BSE | NSE 01/06/12 Are Mutual Funds betting on Consolidated Co?

Angel Broking is bearish on Consolidated Construction Consortium (CCCL) and has recommended sell rating on the stock with a target of Rs 38 in its April 29, 2011 research report.

"Consolidated Construction Consortium (CCCL) has posted a disappointing set of numbers for the fourth consecutive quarter below our and street expectations. The top line came in flat mainly on account of slow-moving infrastructure orders. However, the blow in the company's performance came from the big drop in the margin. CCCL's bottom line was also disappointing, due to sedate top-line growth and a huge margin decline. We are revising our estimates downwards for FY2012 and FY2013 to reflect the same and are downgrading the target multiple to 9x from 10x. Going ahead, we expect margins to be under pressure and the stock to get de-rated on the bourses."

"CCCL's top line grew by mere 1.1% yoy to Rs 643.0cr (Rs 636.3cr), which was marginally lower than our estimate of Rs 675.0cr. However, the shocker came at the operating front, as the company posted abysmal EBITDA margin of 3.5% (11.4%), a drop of 790bp, against our expectations of a 150bp dip. On a sequential basis as well, margin saw a decline of 620bp. The main reason for the margin decline was the increase of 710bp and 170bp yoy in materials cost and subcontracting cost, respectively, as a percentage of sales. The company cited error in the estimation of material cost for fixed price contracts, which led to this disaster. This translated in the bottom line declining by 95.5% yoy during the quarter."

"CCCL has been consistently disappointing on the top-line front and posting erratic numbers on the bottom-line front for the last four quarters. The order inflow is showing signs of revival, but the critical execution leg is dragging the performance of the company. CCCL has always been commanding a premium over peers due to its superior return ratios, which are now headed southwards. Hence, we have revised our numbers downwards to factor in the same. We further downgrade the stock to Sell (Neutral) with a revised target price of Rs 38," says Angel Broking research report.

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To read the full report click on the attachment