Accumulate Punj Lloyd; target of Rs 74: Emkay

Emkay Global Financial Services is bullish on Punj Lloyd and has recommended accumulate rating on the stocks with a target of Rs 74 in its November 12, 2012 research report.

“Punj Lloyd’s 2nd consecutive quarter of robust operational performance- wherein Ebidta margin stood at 9.9% against 10.5% in Q1FY13 and atleast 300 bps higher then estimates. Led by strong order backlog and healthy execution thereof, revenues grew 16% yoy to Rs27.8 bn, in line with estimates. EBITDA margins improved sharply by 490 bps yoy to 9.5% – attributed to favourable revenue mix. Consequently, EBITDA grew by a robust 36% yoy to Rs2.8 bn, staying ahead of estimates. Infact, adjusting for one-time write-off of claims of Rs527 mn (Baroda Project), performance would have been even better.”

“High financial leverage negated strong operational performance. Depreciation increased by 19% yoy to Rs928 mn – led by 24% rise in gross block in FY12. While interest expenses jumped 60% yoy to Rs2.1 bn – owing to rise in interest costs and debt drawn. Consequently, Punj reported net loss of Rs179 mn in the quarter. Consolidated debt stood at Rs60 bn in Q2FY13 versus Rs57 bn in Q1FY13 – increased 5% qoq. On the contrary, interest expenses jumped 50% yoy to Rs3.9 bn in H1FY13. Debt limits drawn/utilized from banks seems higher then the qtr-end debt figures. The debt increase is function of (1) capital requirements for BOT projects and (2) rise in working capital cycle.”

“Punj Lloyd operates on 65:35 Domestic Debt / Foreign Debt ratio and average cost of borrowing at 9-10%. We had forecasted for change in debt profile and corresponding reduction in interest payouts. YTD13 has not seen reduction of interest expenditure; neither Punj Lloyd has restructured debt profile. We cut earnings by 75% and 18% for FY13E and FY14E respectively. Retain accumulate with price target of Rs74/Share,” says Emkay Global Financial Services research report.

Shares held by Central Governments/State Governments

 Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More