Accumulate HCC; target of Rs 43: Dolat Capital

Dolat Capital's research report on HCC

HCC’s standalone revenue declined 5.3 % YoY to ` 9.3bn in Q 1FY18 (1 8.8% below estimates) due to slower execution in J&K. Excluding claims of ` 800 mn (`770 mn in Q 1FY17), core revenue declined 6.1% YoY to ` 8.5 bn.  EBITDA margin expanded 70 bps YoY to 18.3 % (239 bps above estimates) due to higher EBITDA margin of 40% vs. 26% on claims recovery. Excluding claims, core EBITDA margin declined 63bps YoY to 16.2%.  PAT grew 33.5% YoY to ` 145 mn (47.8% above estimates).

Outlook

However, due to limited upside potential, we maintain ‘Accumulate’ with an SOTP- based target price of ` 43.4 (Exhibit 1).