Sadbhav Engineering: Execution-Driven Growth
Sadbhav Engineering: Execution-Driven Growth
Sadbhav Engineering: Execution-Driven Growth
Sadbhav Engineering
BUY
INDUSTRY INFRASTRUCTURE Execution-driven growth
CMP (as on 15 Feb 2017) Rs 275 Sadbhav Eng (SEL) reported strong 3QFY17 revenue Highlights of the Quarter
growth (14.8% YoY), leading to 18.5% APAT beat.
Target Price Rs 327 Going forward, four HAM projects are expected to Strong execution led by roads segment: SELs 3QFY17
contribute Rs 2bn+ incremental revenue in 4QFY17E, financial performance was lead by 23% YoY growth in
Nifty 8,725
leading to a strong performance. SELs net debt has the Transportation segment, whilst irrigation declined
Sensex 28,156 26%. With the resolution of service tax issues, the
increased to Rs 13.6bn (+Rs 2.3bn QoQ), as it paid a
KEY STOCK DATA mining segment is expected to pick up in FY18E.
Rs 1.1bn mobilisation advance to NHAI and
Bloomberg SADE IN
supported SIPL with Rs 700mn loans. Debtors Balance sheet deterioration, temporary: SELs net
No. of Shares (mn) 172 continue to remain at Rs 14.5bn vs guidance of debt increased by Rs 2.3bn QoQ, as it repaid Rs 1.1bn
MCap (Rs bn) / ($ mn) 47/706 coming down to Rs 10bn by FY17E end. of interest-bearing NHAI advance and supported SIPL
6m avg traded value (Rs mn) 32 with a credit line of Rs 700mn Net debt may inch up
Going ahead, SEL expects to win new orders worth
STOCK PERFORMANCE (%) Rs 20-25bn in 4QFY17E, as ~Rs 400bn of bids for further to Rs 15bn, to retire balance NHAI advances of
52 Week high / low Rs 309/197 roads would get finalised by Mar-17E. The balance Rs 2bn, implying that a debt reduction will occur once
3M 6M 12M sheet remains stable, with net debt at Rs 0.85x vs Rs 3.1bn of HAM advances are received in 1QFY18E.
Absolute (%) (1.5) (1.9) 13.1 0.7x during 2QFY17. WC cycle recovery from 1QFY18E: Speedier execution
Relative (%) (8.5) (1.9) (6.4) SEL has maintained its FY17E revenue guidance of Rs has resulted in higher debtors, as NHAI payment have
SHAREHOLDING PATTERN (%) 35-36bn for FY17E, and Rs 38bn+ for FY18E. We roll become milestone based. SEL now expects debtors to
Promoters 46.76 over our estimates to Mar-19E and maintain BUY be maintained at current levels of Rs 14.5bn vs earlier
FIs & Local MFs 27.01 with TP of Rs 327/sh. guidance of sub Rs 10bn by FY17E end.
FPIs 16.88
Financial Summary (Standalone)
Public & Others 9.35
Year Ending March (Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) FY16 FY17E FY18E FY19E
Source : BSE
Net Sales 8,648 7,531 14.8 6,156 40.5 31,863 32,847 39,239 46,174
EBITDA 938 739 27.0 654 43.5 3,254 3,505 4,227 5,079
APAT 416 286 45.8 185 124.8 1,350 1,360 1,904 2,506
Diluted EPS (Rs) 2.4 1.7 45.8 1.1 124.8 7.9 7.9 11.1 14.6
P/E (x) 35.0 34.7 24.8 18.8
Parikshit D Kandpal EV / EBITDA (x) 18.1 16.1 13.0 10.5
parikshitd.kandpal@hdfcsec.com RoE (%) 9.2 8.4 10.7 12.5
+91-22-6171-7317 Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Page | 2
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
With a pick up in the roads Roads Share Of Order Book Has Been Growing Road orders: Captive BOT increasing
segment, share of road Rs bn Transportation Irrigation Mining Rs bn BOT EPC
100 60
Within the roads vertical, 50
captive BOT projects have 80
40
been increasing on the back 60
of new HAM projects 30
40
20
Share of roads in revenue has 20 10
been increasing; mining 0 -
segment is stable and
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
irrigation has been highly
volatile
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
Page | 3
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Order Book To Multiply 1.3x Over FY17-19E EBIDTA Margins To Remain At 11% In FY19E
We expect SEL order book to Order Book (Rs mn) Revenues (Rs mn)
multiply 1.3x over FY17-19E Order book/sales (x) - RHS Revenues (Rs bn) EBIDTA Margins (%) - RHS
150 6.0 50 12
Roads, Mining and Irrigation
40 10
segments shall be the key 120 5.0
drivers of the order book 90 4.0 30
8
6
SEL is evaluating Mining 60 3.0 20
4
development orders
30 2.0 10 2
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY19E
FY19E
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY17-19E order inflow CAGR Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research
of 18.1% will largely be driven
by the Roads segment (this Order Inflow CAGR of 18.1% over FY17-19E Order Book Mix 3QFY17 (%)
includes recently-won HAM Mining
Order Inflow (Rs bn)
orders of Rs 31.3bn) 70
23%
63
Roads -
60 BOT
50
50 45 45 31%
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY19E
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research
Page | 4
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Page | 5
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Page | 6
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Page | 7
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Page | 8
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Page | 9
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
RECOMMENDATION HISTORY
Sadbhav TP
Date CMP Reco Target
400 9-Feb-16 299 BUY 367
29-Apr-16 263 BUY 324
350 6-Sep-16 290 BUY 324
2-Dec-16 275 BUY 321
300 16-Feb-17 275 BUY 327
250
Rating Definitions
200 BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Feb-16
Sep-16
Feb-17
Nov-16
Jun-16
May-16
Dec-16
Mar-16
Oct-16
Aug-16
Apr-16
Jan-17
Jul-16
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
Page | 10
SADBHAV ENGINEERING : RESULTS REVIEW 3QFY17
Disclosure:
I, Parikshit Kandpal, MBA author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject
issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
Disclaimer:
This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or
arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of
warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for
information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be
construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments.
This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any
locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HDFC
Securities Ltd or its affiliates to any registration or licensing requirement within such jurisdiction.
If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may
not be reproduced, distributed or published for any purposes without prior written approval of HDFC Securities Ltd .
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived
from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.
It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HDFC Securities Ltd may from time to time solicit from, or perform broking, or other services
for, any company mentioned in this mail and/or its attachments.
HDFC Securities and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies)
mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and
other related information and opinions.
HDFC Securities Ltd, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any
action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the
dividend or income, etc.
HDFC Securities Ltd and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report,
or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report.
HDFC Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any
other assignment in the past twelve months.
HDFC Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report
for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or
specific transaction in the normal course of business.
HDFC Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research
report. Accordingly, neither HDFC Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is
not based on any specific merchant banking, investment banking or brokerage service transactions. HDFC Securities may have issued other reports that are inconsistent with and reach
different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served
as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research
Report. HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475
HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
Board : +91-22-6171 7330www.hdfcsec.com
Page | 11