Buy Simplex Infra; target of Rs 197: Angel Broking

Angel Broking is bullish on Simplex Infrastructure and has recommended buy rating on the stock with a target of Rs 197 in its February 18, 2013 research report.

“Simplex Infrastructures (Simplex) reported slow execution and lower profitability in 3QFY2013 due to stagnant order book and delayed payments from clients. The company has an order book of Rs15,064cr (2.5x trailing revenue) as of 3QFY2013. It secured orders worth Rs1,239cr and Rs4,254cr in 3QFY2013 and 9MFY2013 respectively.”

“On the top-line front, the company reported a decline of 13.9percent yoy to Rs1,352cr, which was 24.7percent and 21percent lower than our and consensus estimate. Revenue contribution from domestic and overseas operations stood at 85percent and 15percent, respectively, for 9MFY2013. On the operating front, the company reported an EBITDA of Rs129cr, a growth of 8.9percent qoq in 3QFY2013. Adjusting for the foreign exchange MTM loss of Rs0.6cr, the EBITDA margin stood at 9.6percent and was higher than our estimate of 8.7percent. The company reported an adjusted PAT of Rs12cr (was below our estimate of Rs28cr) in 3QFY2013, a decline of 43.8percent yoy. This was mainly due to lower-than-expected revenue growth during the quarter.”

“Simplex has been performing well on the revenue front since the last four consecutive quarters and has a strong order book of Rs15,064cr (2.5x trailing revenue). However the Management has earlier given a guidance of 10-15percent on the revenue front for FY2013 owing to the macro challenges faced by the sector. Going forward, given the current order book mix, we estimate Simplex to report a revenue and PAT CAGR of 9percent and 21percent respectively over FY2012-14. We maintain our buy rating on the stock, with a target price of Rs197 per share, valuing the company at 8x FY2014E earnings,” says Angel Broking research report.

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