Edelweiss research report on Hind ConstrHindustan Construction Company's (HCC) adjusted loss in Q2FY16 at INR51mn was way below our INR486mn loss estimate, aided by settlement of INR1.7bn claims. Reported EBITDA margin at 19.5% improved 64bps YoY due to claims recognition. Sale of 247 park netted INR1.6bn cash for HCC, leading to debt declining by INR500mn QoQ to INR47bn. Improving revenue visibility (order book at INR160bn, 4x TTM revenues) and potential faster conversion of claim wins into cash post the recent ordinance to amend Arbitration Act are key triggers for the stock. Maintain 'BUY' with SoTP‐based target price of INR50.Improvement in order intake, falling leverage (2.6x against 3.6x at FY15 end) and possibility of early claim settlement are key positives for the stock. BOT stake sale can further provide comfort to investors worried about high leverage. We maintain our SOTP‐based target price of INR50—INR23/share from EPC business (valued at 1‐year forward book value), INR15/share from BOT projects (DCF valuation) and balance from Lavasa. We reiterate ‘BUY’ recommendation For all recommendations, click here 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.
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