Angel Broking neutral on Hindustan Construction Company

Angel Broking has maintained neutral rating on Hindustan Construction Company (HCC), in its April 28, 2012 research report.

“For 4QFY2012, HCC continued its poor performance on the numbers front as expected. HCC’s top line came in higher-than-expected owing to inclusion of arbitration award in the top line. Further, abysmal EBITDAM and high interest cost lead to higher-than-expected loss at the earnings level. The total outstanding order book stands at Rs15,336cr (excluding L1 orders of Rs1,713cr) with muted order inflow of Rs1,889cr (decline of ~44% on yoy basis) for FY2012. Owing to concerns such as slowdown in order inflow, high debt and stretched working capital, we remain Neutral on the stock.”
“On the top-line front, HCC’s revenue declined by 3.9% yoy to Rs1,156cr against our estimate of Rs1,022cr. However, it includes ~Rs166cr (total arbitration award Rs256cr) of arbitration award excluding which it would have stood at ~Rs990cr. EBITDAM came in at shocking 7.6%, a dip of 680bp yoy and lower than our estimate of 11.8%. On the earnings front, HCC reported a loss of Rs54cr vs. profit of Rs23cr in 4QFY2011, against our estimate of loss of Rs23cr owing to lower EBITDA margin and higher interest cost. Interest cost witnessed an increase of 39.4% and 6.3% on yoy and qoq basis respectively.”
“On the back of poor performance in 4QFY2012 we are revising our estimates downwards for FY2013 and FY2014. The outlook for HCC remains bleak given the fact that its execution has slowed down considerably; its balance sheet is loaded with debt resulting in high interest cost. Although HCC is hoping to get approval for final debt restructuring package in next 30-35 days we believe HCC has long way to go before the company is able to turnaround itself. Hence we continue to maintain our Neutral view on the stock. Further, in the infrastructure space, we believe there are better bets than HCC such as L&T, Sadbhav and IRB,” says Angel Broking research report.     Shares held by Financial Institutions/Banks    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

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