Shares of Dilip Buildcon fell nearly 24 percent in the last one month on the back of higher volume. The stock on Tuesday declined nearly 4 percent to Rs 225 a share while so far this year it lost nearly 50 percent.
Brokerage firm Kotak Institutional Equities has dropped its coverage on the stock. Kotak said Dilip buildcon is facing multiple headwinds - limited order book growth, execution challenges, and sharp decline in margins and profitability. Though the present strong order book gives decent visibility on revenues, legacy orders having lower margins as well as higher working capital will keep performance under pressure, Kotak added.
The firm reported a consolidated loss of Rs 41.10 crore in the March quarter against a profit of Rs 186.20 crore a year ago. Revenue fell over 15% to Rs 2664 crore.
EBITDA has declined 48% from a year ago to Rs240 crore. EBITDA margin was lower at 10% versus16% year on year.
Fourth quarter FY22 margins were subdued on account of execution of old projects which did not have price escalation clauses and raw material price volatility. The company has provided revenue guidance of Rs10000 crore for FY23E with margins at 13-14% versus current margins of 8% for FY22, analysts said.
"The company currently is executing legacy orders having lower margins which are expected to be executed by first half of FY23E and margins are expected to improve thereafter," analysts added.
On the positive side, in FY22 order inflow was Rs7800 crore and order book at Rs25600 crore. Analysts said this provides visibility at 2.8x FY22 revenue.
IDBI Capital has revised its profit estimate lower by 12% for FY24E and lowered target price to Rs264 (earlier Rs370). "We still wait for improvement in margin in the coming quarter before upgrading stock rating to BUY, as valuation is attractive with stock quoting at 0.8x FY22 book value", IDBI Capital said.
