Pratibha Industries Ltd

Transcription

ENAM DIRECT
EQUITY RESEARCH
For private circulation only
Pratibha Industries Ltd (Pratibha), the flagship company of the Pratibha Group is
engaged in the design, engineering, construction of complex water transmission &
distribution projects, mass housing projects, commercial complexes and road
construction. Over past one decade Pratibha has executed projects worth ~Rs 6,100 cr.
BUY
The Company operates through three segments:
¾ Water Projects (40.1%): Water treatment plants, Water T&D Projects, elevated and
underground reservoirs etc.
¾ Building Projects (34.4%): Residential/Comm., Hospitals, Car parks etc.
¾ Urban Infra (25.5%): Airports, Metros & Railways, Tunnelling, Roads/Bridges etc.
Investment Rationale
•
COMPANY REPORT
•
•
•
•
•
One of the leading players in the infrastructure segment: Pratibha has emerged as
one of the leading players in the infrastructure segment with 3 decades of
experience & focus towards a wide range of projects in water supply, surface
transport, urban infra as well as BOT projects.
Strong & well diversified order book (4x FY12 sales) provides revenue visibility
for 30-36 months: Pratibha has an order book of Rs 6,611 cr as on June 12’ (Rs 5,102
order backlog + Rs 1,509 new orders) diversified across water projects (40.1%),
building projects (34.4%) and urban infrastructure (25.5%). There are 66 running
projects (Public/Govt: Private – 77:23); largest being the tunnel project for Delhi
Metro Rail Corp. (4 projects) which constitutes 24% of order book. Top 10 projects
contribute ~66% towards the total order book.
Pan India presence: Pratibha initially started as a focused player in Maharashtra
but has now diversified across different states in past few years. Out of the total
order book Maharashtra contributes only 27%, Delhi 48%, Bihar 7%, Dubai 2% and
remaining 16% is distributed in rest of India. We expect Pratibha to expand across
India and maintain its order book growth.
Execution of projects through Joint Venture: Pratibha has been executing projects
in Joint Venture (JV) with international and domestic players to target specific high
potential orders across the EPC segment. This model not only enables the company
to execute large size projects but also facilitates to have Pan India presence and
enhances its technical & financial qualification, thus, de-risking its business model.
Managing working capital efficiently: Pratibha has been able to maintain a
healthy operating profitability due to its efficient working capital management. As
of March 2012, company's working capital stood at 112 days.
Operating margins expected to sustain at current levels: Company has not only
secured reasonable margin orders but also has effectively managed its operating
cost which has helped it to improve on operating levels over the last 3 years Operating margin has gone up from 10.8% in FY10 to 13.3% in FY12 and we expect
the margins to sustain between 13.25%-14.00% levels owing to 1) Company’s focus
towards high margin water engineering & tunnelling projects 2) Order book is well
protected through escalation clause.
CMP (Rs)
48
Target price (Rs)
65
Potential upside
35%
Stock data
No. of shares (cr)
10.10
FV (Rs)
2
Market cap (Rs cr)
485
52 Wk Hi/low (Rs)
54.45/27.80
Avg. daily vol.* (Shrs) 1,00,339
BSE Code
532178
NSE Code
PRATIBHA
Bloomberg code
PRIL IN
Reuters Code
PRTI.BO
* 6 monthly average
Shareholding (%)
June-12
QoQ Chg
Promoter
51.83
(0.61)*
FIIs
15.73
(0.28)
MFs / UTI
5.06
(0.15)
Others
27.38
1.04
* On account of conversion of Preference shares
allotted to Van Dyck. (Subsidiary of Chrys Capital).
Price performance
19000
100
18000
17000
50
Initiate with a BUY rating
16000
Pratibha Industries would benefit from its strong order book position. Company has
15000
0
constantly demonstrated its capabilities by performing exceedingly well over a period
Aug-11
Oct-11
Dec-11
Feb-12 Apr-12
Jun-12
Aug-12
of time wherein revenue grew at 41%, operating profit grew at 44% & net profit at 32%
CAGR from FY2007-2012. We expect Pratibha’s revenue to grow at 27%, operating
profit at 26% & profits at 21% CAGR (FY12-FY14). Looking at the strong & quality Source: Cap. line, ENAM Direct Research
order book from eminent clientele we believe Pratibha is available at an attractive
valuation. At CMP of Rs 48, the stock is trading at 4.1x its FY14E EPS (over 40% Vinay Bhandari
[email protected]
discount to its 2yr fwd PE multiple of 7x). We initiate a ‘BUY’ on Pratibha Industries
with target price of Rs 65 (valued at 5.5x FY14E EPS ~ 20% discount to its 2 yr fwd PEx)
– a potential upside of 35% over 15-18 months period.
BSE_SENSEX
Financials (Consolidated)
Y/E Mar
2011
2012
2013E
2014E
Sales
(Rs cr)
1,268
1,666
2,199
2,705
PAT
(Rs cr)
71
82
94
120
EPS
(Rs.)
7.1
8.3
9.3
11.8
Change
(YoY %)
5
17
13
27
P/E
(x)
6.8
5.8
5.2
4.1
RoE
(%)
18.8
15.8
15.7
17.2
RoCE
(%)
20.7
16.6
16.0
17.1
EV/EBITDA
(x)
4.5
5.7
5.0
4.4
DPS
(Rs)
0.6
0.6
0.8
1.0
Source: Company, ENAM Direct Research
ENAM Securities Direct
30th August 2012
COMPANY OVERVIEW
Pratibha Industries Ltd., promoted by Mr. Ajit B. Kulkarni in 1982, has a very vast
experience in the construction industry. Pratibha Ind. is one of the fastest and consistently
growing construction companies in India with consolidated revenue growth of 41% and
PAT growth of 32% CAGR during FY07-FY12 respectively. This was primarily supported
by strong execution track record backed by robust growth in the order book which grew at
6x over past 5 years to Rs 6,611 cr. The order book contains quality orders from water and
urban infra space with average operating margin of 13.25%-14.00%. Company Overview
Pratibha Group
Construction Division
Saw Pipes (In-house)
Water Supply and Environmental Engineering
¾ Water Transmission
¾ Water / Waste Water Treatment
¾ Integrated Water Supply Projects
Commenced Production in Mid 2007.
Manufactures high Quality Spiral (HSAW)
line pipes for water, oil & gas application
Urban Infrastructure and Underground Works
¾ Airports
¾ Metros & Railways
¾ Roads / Bridges
¾ Tunneling
¾ Micro Tunneling
Capacity – 90000 MT per annum
Buildings
¾
¾
¾
¾
High Rise Buildings / Iconic Structures
Retail / Commercial / Residential Projects
Hospitals and Schools
Car Parks
Concessions
Oil and Gas
¾ Onshore Projects
¾ Offshore Projects
Range 16” to 100” (400 mm to 2500 mm) Dia.
In house capacity to provide –
¾ External pipe coating by 3 layer
polyethylene
¾ Internal lining by Liquid Epoxy OR
centrifugally applied Cement
Mortar lining
¾ Plant located in close proximity to
National Highway and Seaports like
JNPT & Mumbai
Provides pipes to construction division for
water management projects, giving
a competitive edge
Accredited with ISO 9001, EMS ISO:14000,
OHSAS 18001 besides IS:3589, IS:5504,
API-5L license
Pratibha also owns a HSAW Pipe division (Pratibha Pipes and Structural Limited - PPSL)
in Maharashtra with a total capacity of 90,000 M.T.P.A. This primarily provides backward
integration for water and oil & gas pipeline projects and to meet the external demand. This
division though profit making, has now become unviable given the excess capacity in the
domestic market. Management decided to merge it in the share swap ratio of 6:1 (Pratibha:
PPSL).
30th August 2012
2
GROWTH PATH
Company Overview
2000
Net Revenue grew 41%; EBITDA at 44% & Profits at 32% CAGR
1,666
Amount (Rs Cr)
1600
1,268
1200
1,007
746
800
476
295
400
0
83 42
61 35
36 20
FY 07
FY 08
Net Revenue
FY 09
Operating Profit
139
176
57
FY 10
225
70
FY 11
82
FY 12
Net Profit
Order book Break up
Region-wise
4.6%
Public/Govt. : Private
0.9% 0.4%
0.9%
0.5%
0.2%
2.1%
23%
7.1%
26.9%
2.4%
2.2%
2.1%
1.1%
48.4%
77%
MP
Rajasthan
UP
Haryana
Dubai
Goa
Gujarat
Karnataka
J&K
Tamil nadu
Bangladesh
Maharashtra
Bihar
Delhi
Private
Public/Govt
30th August 2012
3
Top 10 Orders
Sr.
No
Project Description
Client
Segment
Tunnels, Stations and Ramp by Cut & Cover method
Delhi Metro Rail
Urban
between Motibagh and Lajpat Nagar Stations for
Corporation Ltd.
Infra
City
Size
(Rs Cr)
Delhi
1,090
Design and Construction of Tunnel by Shield TBM,
1
underground works
2
Interceptor Sewer
Engineers India Ltd
Water
Delhi
681
3
Interceptor Sewer
Engineers India Ltd
Water
Delhi
553
Delhi Metro Rail
Urban
Corporation Ltd.
Infra
Delhi
401
Patna
375
Design and Construction of Tunnel by Shield TBM 4
Janpath & Mandi House Stations by Cut and Cover
Method for Underground Works
Construction of ESIC Medical College comprising of
5
Hospital
Building,
Medical
College,
Hostels,
Residential Complex including allied services at Bihta
National Buildings
Construction
Building
Corporation Ltd.
Construction of Group Housing Project "Skyon"at
6
Sector 60 Gurgaon - Civil, Structural & Internal
Ireo Pvt Ltd.
Building Gurgaon
345
Building Mumbai
298
Finishing Works
7
Construction of Residential Building called as
"Runwal Green"
Runwal Developers
Pvt Ltd, Mumbai
Contract For Bulk Water Transmission Pipeline From
8
Dhanki To Maliya Rising Main From Chainage 0 To
Gujarat Water
63 Kms With Intake Arrangement, P.H. & Pumping
Infrastructure Ltd.
Water
Dhanki
290
Water
Mumbai
165
Building Mumbai
156
Machinery Contract No. Nc-30
Replacement of two Nos. of 1800 mm dia. Existing
9
riveted Tansa mains from Tansa to Tarali by One No.
Municipal
2750 mm dia. MS all welded pipeline in the H.E.'s
Corporation of
outside city division. Section I- From Tansa Dam to
Brihan Mumbai
Jamboli
10
Construction of Office Complex for ONGC on plot C- Oil And Natural Gas
69 at Bandra Kurla Complex, Mumbai - 51
Corporation Ltd.
Total Top 10 Orders
4,355
Total Order Book
6,611
Percentage of Total Order Book
66%
30th August 2012
4
INVESTMENT RATIONALE
•
•
Robust & well diversified order book – Concrete visibility for 30-36 months:
Despite an economic slowdown, Pratibha has been able to secure new orders
during FY12. Pratibha has an order book of Rs 6,611 cr as on June 12’ (Rs 5,102
order backlog + Rs 1,509 new orders) diversified across water projects (40.1%),
building projects (34.4%) and urban infrastructure (25.5%). There are 66 running
projects (Public/Govt: Private – 77:23); largest being the tunnel project for Delhi
Metro Rail Corp. (4 projects) which constitutes 24% of order book. Top 10 projects
contribute ~66% towards the total order book.
Order book tilted towards high margin orders
Company Overview
Rs 1,935 Cr
Rs 2,031 Cr
100%
80%
Rs 2,100 Cr
Rs 3,624 Cr
Rs 5,667 Cr
Rs 6,611 Cr
71%
55%
60%
55%
52%
47%
36%
35%
40%
26%
34%
26%
25%
20%
20%
40%
36%
17%
10%
3%
12%
0%
2008
2009
2010
Water
Building
2011
2012
Q1 FY13*
Urban Infra
Historical Sales/Order Book
8000
6000
4.0
3.4
3.0
2.9
2.6
3.0
2.1
4000
2.0
2000
1.0
0.0
0
FY09
FY10
Sales
FY11
Closing Orderbook - Rs Cr
FY12
Q1 FY13*
Orderbook / Sales (RHS)
Source: Company, ENAM Direct Research; * Order Book to Sales on an annualized basis
30th August 2012
5
•
Quality order flow expected to continue: Having developed a formidable
presence in the domestic market, Pratibha is focusing to further expand its
operations across India and in the Middle East where it is already executing a
project for the Dubai Electricity and Water Authority worth Rs 370 cr. We expect
the order flow to continue backed by quality construction and timely execution of
commitment. Also, better business mix & less sub-contraction of work would
ensure better operating margin for the company.
Revenues to grow at 27% CAGR
3000
=
GR
A
C
2500
27%
2,705
Amount (Rs Cr)
2,199
2000
1,666
1500
R=
CAG
1000
41%
1,268
1,007
746
476
500
295
0
FY 07
FY 08
FY 09
FY 10
FY 11
FY 12
FY 13E
FY 14E
Coupled with higher operating profit with stable margins
400
G
CA
26%
=
R
16.0%
300
12.0%
200
R
CAG
%
= 44
8.0%
100
4.0%
0
0.0%
FY 07
FY 08
FY 09
FY 10
Operating Profit
FY 11
FY 12
Margin (%)
FY 13E
FY 14E
30th August 2012
6
Resulting into higher profits
150
Amount (Rs Cr)
=2
R
G
CA
1%
120
94
100
82
R=
CAG
50
32%
70
57
42
35
20
0
FY 07
FY 08
FY 09
FY 10
FY 11
FY 12
FY 13E
FY 14E
•
•
•
•
•
One of the leading players in the infrastructure segment: Pratibha has emerged
as one of the leading players in infrastructure segment with 3 decades of
experience & focus towards a wide range of projects in water supply, surface
transport, urban infra as well as BOT projects. Over past one decade Pratibha has
executed projects worth ~Rs 6,100 cr.
Pratibha set to leverage on its gross block: To reduce its dependency on
outsource/lease of equipments, Pratibha has strengthen its fleet size over the past
5 years. The gross block for the company has increased at 86% CAGR from
Rs 25 cr in FY 2007 to Rs 545 cr in FY 2012. This not only proves to be a cost
effective option for the company but also helps in timely execution of project.
Operating margins expected to sustain at current levels: Company has not only
secured reasonable margin orders but also has effectively managed its operating
cost which has helped it to improve on operating levels over the last 3 years Operating margin has gone up from 10.8% in FY10 to 13.3% in FY12 and we
expects the margins to sustain between 13.25%-14.00% levels owing to
1) Company’s focus towards high margin water engineering & tunnelling projects
2) 95% of order book is well protected through escalation clause.
Consistent endeavour to enter into specialized infrastructure segments to
sustain growth and create a well diversified business model: Pratibha has won
projects into specialized verticals such as Micro Tunnelling and Metros. Company
has been able to increase its segmental portfolio and has created a niche for itself
in various verticals of different segments, thereby, creating a diversified business
model and de-risking its dependence on any particular segment.
Managing working capital efficiently: Pratibha has been able to maintain a
healthy operating profitability due to its efficient working capital management. As
of March 2012, company's working capital stood at 112 days - a comfortable level
by industry standards.
30th August 2012
7
Efficiently managing working capital…
3,000
2,705
2,199
2,000
1,000
40%
30%
1,666
1,007
746
1,268
20%
10%
114
81
107
112
109
107
0
0%
2009
2010
Net Sales (Rs Cr)
2011
2012
Working Capital (Days)
2013E
2014E
Working Cap/Net Sales - (%)
•
•
30th August 2012
BOT projects to enhance value: Pratibha has 2 BOT (Annuity) projects –
1. Bhopal – Sanchi road project from NHAI in 51:49 Joint Venture with Abhyudaya
Housing and Construction Pvt. Ltd. (EPC contractor). The project involves 2 - lanes
of Bhopal-Sanchi section of NH-86 of 54 km to be executed. It has completed 18%
of the work and the construction is expected to be completed by Q2FY14.
Payments to the J.V shall be made through semi-annual annuities of ~Rs. 13 cr for
13 years totalling ~Rs. 338 cr.
2. Delhi Metro Rail Corporation (DMRC) multi level car parking project in which the
company had to construct four levels of car parking and two levels of commercial
space above New Delhi Railway Station cum Airport Terminal of Airport Express
Line. The construction cost is envisaged at Rs 164 cr with a concession period of 30
years. The total commercial space is 0.18 mn sq ft, which Pratibha expects to lease
out by FY13 with an expected lease rental of Rs 165/sq ft/ month.
Execution of projects through Joint Venture route with International and Domestic
players: Pratibha has been executing projects in Joint Venture (JV) with international
and domestic players to target specific high potential orders across the EPC segment.
This model not only enables the company to execute large size projects but also
facilitates to have Pan India presence and enhances its technical & financial
qualification, thus, de-risking its business model. We believe that Company will
continue to enter into JV’s to augment its potential in various projects.
8
Few Strategic alliances with key global players in its business segments
Sr. No.
Name of Partner
Segment
1
Ostu Stettin , Austria
Tunneling
2
ITD, Thailand
Airports
3
China State Construction, Hong Kong
Buildings and Urban Infrastructure
4
Huamei, China
Urban Infrastructure
5
Zhuhai, China
Sewerage
6
China Rail First Group, China
Metros
7
DVGSK, Russia
8
Leikpin, UAE
Oil & Gas – Offshore
9
Gulf Petroleum Services, Oman
Oil & Gas – Onshore
10
Shanghai Urban Construction Group, China
11
Al Ambia Sdn Bhd, Malaysia
Buildings
12
Mosinzhstroi, Russia
Micro Tunneling
13
SMC, Malaysia
Water Treatment
14
Stroystandart, Russia
Concessions
•
Pan India presence: Pratibha initially started as a focused player in Maharashtra but has
now diversified across different states in past few years. Out of the total order book
Maharashtra contributes only 27%, Delhi 48%, Bihar 7%, Dubai 2% and remaining 16% is
distributed in rest of India. We expect Pratibha to expand across geographies and maintain
its order book growth.
Jammu & Kashmir
Harayana
Delhi
Assam
Uttar Pradesh
Rajasthan
Gujarat
Bihar
Madhya Pradesh
Bangladesh
Maharashtra
Thana
Mumbai
Goa
Hyderabad
Andhra Pradesh
Pratibha Group presence
Corporate Office
Karnataka
Zonal Office
Tamil Nadu
Plant
30th August 2012
9
BUSINESS OVERVIEW
Water Supply & Environmental
EngineeringSegment overview
•
Water
Supply
and
Environmental
Engineering
Water Transmission Projects
¾ Water / Waste Water Treatment Projects
¾ Integrated Water Supply Projects
¾ Metering Projects
¾
•
Executed more than 1,000 km of pipeline
projects for various diameters upto 3000 mm,
under the following types of contracts:
•
Turnkey & Design Build Contracts
Annuity Contracts
¾ Cash Contracts
¾
•
Significant
Operation
&
Maintenance
Experience for above projects.
Key clients
Key projects executed
Project Description
Project Cost
(Rs Cr)
Construction of Integrated Water
Supply Scheme at Nagaur,
Rajasthan on turnkey basis.
332
Providing & Laying 3,000 mm dia
Water Transmission Pipe Line
near Mumbai.
274
Design & Construction of 24 x 7
Water Supply Scheme in Navi
Mumbai.
201
Water Transmission Pipe Line
near Mumbai.
161
Water Transmission Pipe Line in
Mumbai.
124
Design & Construction of Storm
Water Pumping Station in
Mumbai.
75
Key projects Underway
•
Municipal Corporation of Greater Mumbai
Project Description
•
Delhi Jal Board
•
406
Gujarat Water Infrastructure Limited
Replacement of Tansa Mains by
2750 mm dia MS Pipelines.
•
Rajasthan Public Health & Engineering
403
Department
Contract for Pumped Water
Supply Scheme Danki for Gujarat
Water Infrastructure Ltd
•
Bangalore Water Supply & Sewerage Board
Integrated Water Supply Scheme at
Meerut (Turnkey).
294
•
Jammu & Kashmir Economic Reconstruction
Augmentation of Water Supply
Network in Navi Mumbai
162
Supply & Installation of AMR
Water Meters in Mumbai City.
153
Agency
•
Navi Mumbai Municipal Corporation
Project Cost
(Rs Cr)
30th August 2012
10
Integrated Water Supply Scheme at
Nagaur, Rajasthan
Al Ghafat Reservoir, Dubai
Supply & Installation of 3000 mm internal diameter M.S rising main
Intake with Treatment Plant & Pumping Station at Latur, Maharashtra
30th August 2012
11
•
Urban Infra & Underground Works
Segment overview
•
•
•
Urban Infrastructure & Underground Works
¾ Airports
¾ Metros & Railways
¾ Roads / Bridges
¾ Tunneling
¾ Micro Tunneling
Fastest Growing Segment with the highest
potential
Project Portfolio comprises
¾ Two International Airports completed
¾ Two Tunnels aggregating to 11.5 km
day-lighted
¾ One Metro Contract under execution
with 5 km of tunnels
¾ 33.8 kms of Micro Tunneling under
implementation
¾ Vast Asset Base comprising 4 TBMs &
¾ 9 MTBMs
Key Clients
•
•
•
•
•
•
Project Description
Project Cost
(Rs Cr)
Construction of 6.8 km long
Modak Sagar Tunnel near
Mumbai.
223
Construction of 3.6 km long
Tunnel from Malabar Hill to
Cross Maidan in Mumbai.
157
Construction
of
New
International Terminal Building,
Ahmedabad, India.
122
Modular Expansion of Amritsar
Airport, India
106
Modular Expansion of Delhi
Airport-Arrival Terminal, India
55
Municipal Corporation of Greater Mumbai
Engineers India Limited
Airports Authority of India
Delhi Metro Rail Corporation
National Highways Authority of India
Delhi Jal Board
Project Description
Project Cost
(Rs Cr)
Design and Construction of
Interceptor Sewers including
Micro-tunneling (2 Packages) for
the Delhi Jal Board
1,250
Design and Construction of
Tunnel by Shield TBM and 2
Underground Stations for Delhi
Metro
467
30th August 2012
12
Sardar Vallabhbhai Patel Internl.
Airport, Ahmedabad
Delhi International Airport –
Domestic Terminal
Metro Rail Delhi
Railway Station –
Ghansoli, Navi Mumbai
Railway Station at Airoli , Navi
Mumbai
Malabar Hill & Modak Sagar Tunnel in
Mumbai
30th August 2012
13
•
Building
Segment overview
•
•
•
•
•
•
Buildings
¾ High Rise Buildings /
Iconic Structures
¾ Retail / Commercial /
Residential Projects
¾ Hospitals and Schools
¾ Car Parks
Project Description
Made significant headway by building an
order book of US$ 400mn in less than
5 years
Implementing a range of diverse Projects
for leading Clientele across Government
& Private Sectors
Currently more than 20 projects
underway with more than 20 million sft
under construction
Significant investment in asset base viz.
Form Work Assets > 1,00,000 sq. mtrs.,
30 Tower Cranes, 35 Concrete Pumps,
25 Batching Plants
Expect significant ramping up of this
segment in the near future by expanding
into newer geographies and adding new
clients
Key Clients
•
•
•
•
•
•
•
Project Cost
(Rs Cr)
The Capital(C 70): Construction of 22
Storeyed Commercial Tower with 6
Basements (1,400 Car Parks) at
Bandra-Kurla Complex, Mumbai
181
Imperial Heights: Construction of
Twin High Rise Residential Complex
(50 Storeyed) with Aluminum
Shuttering (6 Day, Slab Cycle) in
Mumbai
90
Sunshine Tower: India’s Tallest
Structural Steel Commercial Building
(192 Mtrs) in Mumbai
60
MCT: Construction of Institutional
Building in Navi Mumbai
40
The Capital (C 70): Construction of
22 Storeyed Commercial Tower with
6 Basements (1,400 Car Parks) at
Bandra-Kurla Complex, Mumbai
181
Tata Housing
Project Description
Rustomjee Group
National
Building
Corporation
Construction
ONGC
Wadhwa Associates
IREO
Pioneer Land Development
Project Cost
(Rs Cr)
Construction of ESIC Hospital and
Medical College in Patna, Bihar
525
Construction of 2 Residential
Complexes in Gurgaon near Delhi
366
Construction of Corporate Office for
ONGC in Mumbai
241
Construction of Mega Residential
Township near Mumbai
180
30th August 2012
14
Imperial Heights , Mumbai – Wadhwa
Group
THE CAPITAL(C70), Mumbai –
Wadhwa Group
DMRC Multi-Level Car Park in New Delhi
AMANTRA, Kalyan – TATA Housing
ONGC, CORPORATE OFFICE, Mumbai
ANGELICA & ASPEN, Mumbai –
Mahindra Life
ESIC Medical College & Hospital, Bihar
- NBCC
30th August 2012
15
VALUATIONS & OUTLOOK
We believe Pratibha Industries would benefit from the opportunities in the infrastructure
segment derived primarily by the 12th Five Year Plan. Company has constantly
demonstrated its capabilities by performing exceedingly well over a period of time. We
expect Pratibha’s revenues to grow at 27%, EBITDA at 26% & profits at 21% CAGR (FY12FY14). Also, the return ratio profile for the company should improve since major capex
(fleet size – machinery) is over which would take care of its revenues till FY14E. Hence we
believe that asset turnover would improve going forward which would result in quality
earnings.
Looking at the strong & quality order book from eminent clientele we believe Pratibha is
available at an attractive valuation. At CMP of Rs 48, the stock is trading at 4.1x its FY14E
EPS (over 40% discount to its 2yr fwd PE multiple of 7x). We initiate a ‘BUY’ on Pratibha
Industries with target price of Rs 65 (valued at 5.5x FY14E EPS ~ 20% discount to its 2 yr
fwd PE x) – a potential upside of 35% over 15-18 months period.
PE
Mean
+1 STD Dev.
Aug-12
Mar-12
Oct-11
Jun-11
Jan-11
Sep-10
Apr-10
Nov-09
Jul-09
Feb-09
Oct-08
May-08
Jan-08
Aug-07
18
16
14
12
10
8
6
4
2
0
Apr-07
Fwd PE (x)
Pratibha Industries – 2yr Fwd PE (x) band
-1 STD Dev.
Source: ENAM Direct Research
30th August 2012
16
PEER GROUP VALUATION
Sales
( Rs cr)
Company
FY11
FY12
PAT
FY13E
FY11
FY12
EPS (Rs)
PE (x)
FY13E
FY11
FY12E
FY13E
FY11
FY12E
FY13E
Patel Engg.
3,464
3663
3,831
123
75
93
18
10.75
12.7
4.3
7.0
6.0
NCC
6,122
6663
6,738
222
55
86
8
2.14
3.4
4.3
17.1
10.9
Simplex Infra
4,889
5972
6,712
124
84
107
25
16.91
21.6
8.1
12.1
9.4
IVRCL
6,804
7100
7,604
51
51
124
2
2.5
4.6
22.0
16.6
9.0
CCCL
2,199
2128
2,379
47
-8
24
3
0.0
1.9
6.0
NA
8.2
Unity Infra.
1,772
2067
2,200
96
104
108
13
14.01
14.5
3.3
3.0
2.9
918
1506
2,207
76
92
127
48
54.81
49.9
5.8
5.1
5.6
1,002
1265
1,373
62
72
84
35
41.4
41.8
4.5
3.8
3.8
Supreme Infra.
MBL Infrast.
Ramky Infra
3,147
3848
4,470
206
244
204
39
42.67
35.6
2.5
2.2
2.7
Pratibha Inds.
1,268
1666
2,199
71
82
94
7
8.3
9.3
6.8
5.8
5.2
6.8
8.1
6.4
Average
Peer Group Valuation (Cont’d)
P/BV (x)
EV/EBITDA (x)
Operating margin
Company
FY11
FY12e
FY13e
FY11
FY12E
FY13E
FY11
FY12E
FY13E
Patel Engg.
0.4
0.3
0.3
5.8
5.6
5.4
13.7%
13.4%
13.2%
NCC
0.4
0.4
0.4
4.8
3.9
5.0
11.6%
13.4%
10.1%
Simplex Infra
0.9
0.9
0.8
2.5
2.3
1.8
8.6%
7.6%
8.7%
IVRCL
0.4
0.4
0.5
4.4
4.1
3.9
10.8%
11.3%
11.0%
CCCL
0.4
0.5
0.4
3.9
2.5
2.8
4.3%
7.1%
5.7%
Unity Infra.
0.5
0.4
0.4
1.3
1.1
1.2
15.7%
15.3%
13.2%
Supreme Infra.
1.8
1.6
1.5
4.1
2.7
2.0
17.6%
16.4%
15.0%
MBL Infrast.
1.0
0.7
0.7
2.3
1.8
1.6
13.3%
13.3%
13.8%
Ramky Infra
0.5
0.5
0.6
1.4
1.0
1.0
13.9%
15.4%
14.0%
Pratibha Inds.
1.0
0.9
0.8
2.7
2.1
1.6
13.8%
13.4%
13.4%
Average
0.7
0.7
0.6
3.3
2.7
2.6
12.3%
12.7%
11.8%
Source: Bloomberg, ENAM Direct Research
RISK & CONCERN
•
•
Concentrated Order Book: Pratibha derives ~75% of the total orders from Delhi and
Maharashtra. Any slowdown in these respective regions could adversely impact
Pratibha’s performance and future order inflow for the company. However the
company has already started diversified into newer regions/geographies which would
mitigate this risk.
Multiple adverse scenarios: Sustained high interest rates, slowing GDP growth,
currency depreciation, fuel shortages, weak off-takers, execution delays will play
spoilsport for the Infrastructure sector. The slowdown in the economic activity,
especially in the infrastructure space, has resulted in poor performance and scarce
order book for most of the companies in this sector. Also, investments across the board
have taken a backseat with corporate capex activity still looking some time away.
30th August 2012
17
FINANCIALS (CONSOLIDATED)
Profit & Loss Statement
(Rs Cr)
Y/E Mar
2011
2012
2013E
2014E
Net sales
1,268
1,666
2,199
2,705
4
5
8
10
1,272
1,671
2,207
2,715
Other operating income
Total Income
Construction Expenses
981
1,381
1,792
2,204
Cost of Goods Sold
910
1,145
1,559
1,939
Employee Cost
68
107
127
156
Contribution (%)
23%
25%
23%
23%
Other SG&A Expenses
118
195
224
262
Operating profit
176
225
297
357
Other Income
13
6
7
10
PBIDT
189
231
304
367
Depreciation
17
23
39
52
Finance Cost
76
96
135
149
Pre Tax Profit
97
112
130
166
Tax provision
25
30
36
47
Adjusted PAT
71
82
94
120
Balance sheet
(Rs Cr)
Y/E Mar
2011
2012
2013E
2014E
Total assets
928
1,546
1,746
1,954
Gross block
359
545
947
1,022
Net fixed assets
303
466
843
867
CWIP
54
277
50
50
Investments
0
3
3
3
Working cap. (excl cash)
442
608
772
930
Cash / Bank balance
128
193
78
104
Capital employed
928
1,546
1,746
1,954
Equity capital
20
20
20
20
Reserves
448
523
622
730
Borrowings
442
981
1,081
1,181
Others
18
23
23
23
30th August 2012
18
Key ratios
(%)
Y/E Mar
2011
2012
2013E
2014E
Sales growth
26%
31%
32%
23%
OPM
13.8
13.4
13.4
13.1
Oper. profit growth
26
28
32
20
COGS / Net sales
72
69
71
72
Overheads/Net sales
9.3
11.7
10.2
9.7
Depreciation / G. block
5.0%
5.0%
5.3%
5.3%
Net wkg.cap / Net sales (x)
0.3
0.4
0.4
0.3
Net sales / Gr block (x)
3.8x
3.7x
2.9x
2.7x
20.7%
16.6%
16.0%
17.1%
0.6
1.4
1.6
1.4
26.2%
26.4%
27.5%
28.0%
18.8%
15.8%
15.7%
17.2%
9%
7%
9%
9%
7.1
8.3
9.3
11.8
5%
17%
13%
27%
CEPS (Rs.)
9.6
10.6
13.3
17.0
DPS
0.6
0.6
0.8
1.0
ROCE
Net Debt / equity (x)
Effective tax rate
ROE
Payout ratio (Div/NP)
EPS (Rs.)
EPS Growth
Cash flow
(Rs Cr)
Y/E Mar
2011
2012
2013E
2014E
Sources
235
642
224
259
87
105
133
171
Cash profit
7
7
9
12
Retained earnings
(-) Dividends
80
98
124
159
Issue of equity
144
0
0
0
Borrowings
5
539
100
100
Others
5
5
0
0
235
642
224
259
Applications
Capital expenditure
87
409
175
75
Investments
-5
3
0
0
Net current assets
90
166
164
158
Change in cash
62
65
-115
26
30th August 2012
19
APPENDIX
USD 1 tn spending in Infrastructure in the 12th Plan
The Planning Commission of India has stressed on the need and requirement of
infrastructural development in India through a number of policies and initiatives for a
growing economy of India. The initial projections for infrastructure in the 12th Five Year
Plan (FY13-17) is at USD 1 tn. Large investments have been put forward for the Twelfth
five-year Plan which includes over USD 235 bn towards national highways and state
roads, new rail lines, hydropower, metro rail systems, etc. An estimated investment of
USD 135 bn is required in water and sewerage systems during 2012-31 itself. This indicates
that there is huge investment potential in infrastructure. How much it would convert to
real investment have to be watched for.
Opportunities in Infrastructure & Construction Sector
We believe there is an urgency in the Indian economy towards the need for robust
infrastructure to revive and sustain the targeted pace of growth. Infrastructure Industry in
India has been experiencing a rapid growth in different segments due to increase in
urbanization and ever increasing foreign investments in this sector as a whole. With due
government encouragement, the industry has canvas of opportunities.
India’s growing economy is placing huge demands on critical infrastructure – power,
roads, railways, ports, transportation systems, and water supply and sanitation. While the
government has raised its investments in infrastructure, the investment gap remains
daunting with an estimated ~USD 1 trillion required to meet the country’s resource needs
over the next five years.
For India's rapid and sustained growth, major investments in power, transport, water, and
urban development are needed. Inadequate urban infrastructure is hampering the
expansion of growth centres. While the Eleventh Plan had forecasted a major role for
private sector involvement in infrastructure development through PPPs, it has not
materialized to the extent hoped for in the aftermath of the global financial crisis.
The Indian construction industry plays a pivotal part in the national economic growth. It
has witnessed rapid growth over the last few years, clearly indicating the benefit of
securing “Industry” status. The construction sector is strongly linked to the overall growth
and development of the economy. There has been increased emphasis on involving private
sector for infrastructure development through public private ownerships and mechanism
like BOT (Build Operate Transfer), BOOT (Build Operate Own Transfer) and BOLT (Build
Operate Lease Transfer).
30th August 2012
20
Construction sector may be broadly classified into the following categories:
¾
¾
¾
¾
¾
Real estate construction investments (i.e. residential and commercial construction)
Infrastructure construction investments (i.e. roads, urban infrastructure, power,
irrigation and railways)
Industrial construction investments (i.e. steel plants, textiles plants, oil pipelines
and refineries)
Growth in the construction industry is expected to be led by growth in
infrastructure and
Industrial construction investments, which are expected to grow at a faster pace.
Opportunities for Pratibha Industries
India’s economy is expected to grow at a much faster pace than its peers. Liberalization of
government regulations and a deliberate strategy on the part of the Government to
promote infrastructure spells ample opportunity for the growth of Pratibha Industries.
Major infrastructure development requires a substantial influx of investment capital.
Pratibha Ind.’s infrastructure division see excellent opportunities, with roads and
highways, ports and airports, railways and power standing out as particular bright spots,
with staggering sums of investment planned. To capture the growing demand Pratibha
Ind. has partnered with leading global developers and O&M providers to bring worldclass systems and best practices to India.
Company has emerged as one of the leading players in the water segment space with
over 30 years experience in manufacturing of pipes, construction of complex water
supply treatment, surface transport, urban infrastructure as well as BOT Projects. Over the
next few years, Pratibha Ind. is poised to benefit from large Projects planned by the
Central and State governments in the Infrastructure and Construction segment in India.
Pratibha Ind. has also identified new growth areas such as hydro carbon and power
projects which would continue to help the company maintain robust order book growth
going forward. Company also plans to continue to expand its presence across geographies
as well as different business segments which should help in mitigating business specific
and geographic risk.
In its repeated success, Pratibha Ind. has won another contract worth Rs 1,090 cr from
DMRC which involves design and construction of tunnel by TBM’s, construction of
tunnels, stations and ramp by cut and cover between Motibagh and Lajpat Nagar Stations
(both excl.) for underground works on Mukundpur-Yamuna Vihar corridor of Delhi MRTS
project phase III.
30th August 2012
21
CONFLICT OF INTEREST DISCLOSURE
We, at ENAM, are committed to providing the most honest and transparent advice to our clients. However, given the
nature of the capital markets, from time to time we are faced with situations that could give rise to potential conflict of
interest. In order to provide complete transparency to our clients, before we make any recommendations, we are
committed to making a disclosure of our interest and any potential conflict IN ADVANCE so that the interests of our
clients are safe- guarded at all times. In light of this policy, we have instituted what we believe to be the most
comprehensive disclosure policy among leading investment
Banks/brokerages in the world so that our clients may make an informed judgment about our recommendations. The
following disclosures are intended to keep you informed before you make any decision- in addition, we will be happy
to provide information in response to specific queries that our clients may seek from us.
Disclosure of interest statement (As of 24th August 2012)
1. Analyst ownership of the stock
No
2. Firm ownership of the stock
No
3. Directors ownership of the stock
Yes
4. MBD Relationship
No
5. Broking relationship
No
We are committed to providing completely independent and transparent recommendations to help our clients reach
a better decision.
This document has been prepared by Enam Securities Direct Private Limited – Privileged Client Group. Affiliates of Enam Securities Direct Private
Limited focused on Institutional Equities may have issued other reports that are inconsistent with and reach different conclusion from the
information presented in this report. The views and opinions expressed in this document may or may not match or may be contrary with the
views, estimates, rating and target price of the Affiliates research report.
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way,
transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written
consent.
This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of
offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax
advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and
opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own
investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent
judgement by any recipient.
Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in
the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain
transactions -including those involving futures, options and other derivatives as well as non investment grade securities - involve substantial risk
and are not suitable for all investors.
Enam Securities Direct Private Limited has not independently verified all the information given in this document. Accordingly, no representation
or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document.
The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right
to make modifications and alternations to this statement as may be required from time to time without any prior approval.
Enam Securities Direct Private Limited, its affiliates, their directors and the employees may from time to time, effect or have effected an own
account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform
investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of
these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the
document.
This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of
ENAM Securities Direct Private Limited. The views expressed are those of the analyst and the Company may or may not subscribe to all the views
expressed therein.
This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly,
to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or
transmitted into the United State (to U.S. Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or
distributed or redistributed in Japan or to any resident thereof.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality,
state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would
subject Enam Securities Direct Private Limited to any registration or licensing requirement within such jurisdiction. The securities described herein
may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are
required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental,
special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
Copyright in this document vests exclusively with ENAM Securities Direct Private Limited.
30th August 2012
22

Pratibha Industries Ltd

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