Sadbhav Eng has target of Rs 370: Kotak Securities

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26 Aug, 2025 12:21

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Sadbhav’s BOT projects reflect another quarter of very strong and broad-based traffic growth, leading to double-digit traffic growth for FY2015. Another year of strong traffic growth with modest tariff increase would lead to aggregate cash profits for its BOT projects from FY2016 (cash loss likely at 12-14% of FY2015 revenues; includes negative one-offs). We marginally revise our near-term traffic growth assumptions, leading to a revised TP of Rs 370 (from Rs 365).

Most of SEL’s BOT projects have seen strong yoy traffic growth in 4QFY15 (see Exhibits 1 and 2). The traffic growth has been very high for mature projects (16-20%) and strong for projects commissioned about two years ago (9-11%). Service revenues for Maharashtra border check-post have also grown 10% on a sequential basis (not comparable yoy). Weakness in traffic was reflected in a few projects (Dhule-Palasner, Rohtak-Panipat) where traffic growth was negligible/in low single digit.

For the full-year FY2015, SEL’s BOT projects’ toll revenues were up 46% yoy. Accounting for projects that were operational for the past two years (for yoy growth comparison), the growth in revenues was again strong at about 17%. This reflects a double-digit traffic growth for FY2015. We estimate an 8-9% traffic growth over the next two years and then 6% traffic growth for the remaining construction period.

"Key projects making cash losses are (1) Maharashtra border check post and (2) Rohtak-Panipat. Our interactions with the management suggest that the nine operational border check posts are generating about Rs 1 bn of revenues (based on annualized 4QFY15 data) against Rs 150-200 mn of costs and Rs 750-800 mn of interest costs. The key concern is Rohtak-Panipat project, where traffic levels have remained stagnant. High debt service contingency reserve for this project (Rs 750 mn share of project cost; about Rs 300-400 mn remaining) would likely take care of a year of further cash losses", says Kotak Securities research report.

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