"Supreme Infrastructure’s (SPII) Q4FY15 revenue at INR4.2bn was marginally higher than our INR4.1bn estimate. EBITDA margin expanded 480bps YoY to 17.8%. In spite of higher interest costs due to processing fee for JLF agreement, profit before tax surpassed our estimate. However, high tax rate during the quarter led to marginal loss at net level. The company's order book at INR50bn (including L1 orders of ~INR8bn) is 3.3x TTM revenues and provides strong revenue visibility. Interest rate reduction, 2-year moratorium on debt repayment coupled with enhanced working capital limits post the JLF agreement mean the company's cash flows are set to improve and a sharp recovery is in store. Maintain 'BUY' with target of INR526."
"We believe SPII's execution is likely to be on an upswing going ahead and its cash flow position will become healthy over next few quarters. Steady progress on the BOT assets will trigger re-rating of the stock post completion and subsequent monetisation. Our SOTP value stands at INR526—INR323 for EPC business (8x FY17E P/E) and balance from BOT projects (DCF valuation)", says Edelweiss research report.
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