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Last Updated : Jan 12, 2013 01:22 PM IST | Source: Moneycontrol.com

Expect infra cos to post 13% top-line growth in Q3: Angel

Angel Broking has come with its December quarterly earning estimates for Infrastructure sector. According to the research firm, companies in our infrastructure universe are expected to report a subdued top-line growth of 12.8% (YoY) on the back of slowdown in execution.

 
 
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Angel Broking has come with its December quarterly earning estimates for Infrastructure sector. According to the research firm, companies in our infrastructure universe are expected to report a subdued top-line growth of 12.8% (YoY) on the back of slowdown in execution.

Angel Broking Q3FY13 result preview for Infrastructure sector:

For Q3FY2013, we expect our coverage universe to report a subdued top-line growth of 12.8% (YoY) on the back of slowdown in execution. The slowdown in execution pace has been due to a challenging macro environment, policy paralysis, stretched working capital and delays in payments from clients.

During Q3FY2013, there has been no respite from the several headwinds (such as high interest and inflationary cost pressures and slowdown in order inflows) faced by the sector. Thus, dull revenue performance along with pressure on EBITDAM and high interest cost will result in muted performance on the earnings front. Against this backdrop, we expect a muted performance on the earnings front for most of the companies under our coverage universe. Excluding the performance of L&T, earnings for our coverage companies are likely to decelerate to 1.6% yoy.

Outlook and Valuation

There has been no respite for infrastructure companies from persistent headwinds faced by the industry - high interest rates and slower-than-anticipated revival in industrial capex. Further, a stretched balance sheet and working capital on the back of investment in subsidiaries and delays in payment from clients continues to pose a problem. However, infrastructure stocks have seen some positive movement during the quarter. The Union Cabinet has cleared a proposal to set up a Cabinet Committee on Investment (CCI) to fast-track clearances of large investments, particularly above `1,000cr. The committee will be chaired by the Prime Minister and is expected to set timelines for regulatory and administrative clearances from various individual ministries. We believe that although interest rate cuts and increasing investment in the sector remain key triggers for infrastructure stocks, removal of bottlenecks such as delays in environmental clearances and land-acquisition issues are also of prime importance for the execution pace to pick up.

We prefer to remain selective: We believe that stock-specific approach would yield higher returns given the disparity among these companies and changing dynamics affecting them positively/negatively. Hence, we remain positive on companies having 1) a comfortable leverage position; 2) superior return ratios and 3) less dependence on capital markets for raising equity for funding projects. Hence, we recommend L&T, ITNL and SEL as our top picks in the sector.

                      (Rs Cr)
Company NameNet SalesNet Profit
3QFY13E% change3QFY13E% change
ABL52247.854176.9
CCCL491103-
IRB Infra93024.81363.6
ITNL1,57524.210822.5
IVRCL1,059-11.9-13-
JAL3,28813.3144-29.7
L&T15,79012.81,02021.6
NCC1,42712.911-
SEL753438-9.8
Simplex Infra1,79512.52832.8

 

 

 

 

 

 

 

 

 

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First Published on Jan 12, 2013 12:36 pm
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