punj lloyd, 12th february, 2013

7/29/2019 Punj Lloyd, 12th February, 2013

1/11

Please refer to important disclosures at the end of this report 1

Operating profit 291 164 77.8 314 (7.3)

Source: Company, Angel Research

For 3QFY2013, Punj Lloyd (Punj) posted a mixed set of numbers. The

performance at the revenue fronts was subdued, however higher share of profits

from associates led to profitability at the earnings level. The company has secured

orders worth`1,300cr in 3QFY2013, taking its order backlog to`23,690cr (2.0x

FY2013 revenue).

The company reported a subdued top-

line growth of 2.6% yoy to `2,881cr. The EBITDAM for the quarter stood at

10.1%, showing an improvement of 427bp on a yoy basis. Interest cost came in

at `198cr, a jump of 22.2% on a yoy basis, but a fall of 4.7% on a sequential

basis. Depreciation for the quarter was flat at`88cr. On the bottom-line front, the

company reported a PAT of`9cr vs.`70cr in 3QFY2012; that too owing to profits

from its associates (which reported a profit of`8cr vs a loss of`5cr in 3QFY2012)

and healthy performance at the operating level.

Based on its 9MFY2013 performance, we are revising our

EPS estimates for FY2013 and FY2014 to `(0.4) and `3 respectively. Punj has

been looking to reduce its debt through sale of its non-core assets and replacing

Indian debt with foreign debt. However, given the difficult environment we believe

these steps would not yield results before the next six to nine months. Further,

there is no clarity on the time-frame of recovering various outstanding claims as

legal issues such as litigation and arbitration usually are lengthy processes.

% chg (22.1) 29.7 12.6 10.3

% chg - (254.3) (115.4) (795.1)

EBITDA Margin (%) 8.9 8.5 10.2 10.2

P/E (x) - 18.8 (121.9) 17.5

RoAE (%) (2.0) 3.1 (0.5) 3.4

RoACE (%) 6.2 7.9 9.8 10.1

P/BV (x) 0.6 0.6 0.6 0.6

EV/Sales (x) 0.5 0.5 0.6 0.5

EV/EBITDA (x) 6.0 6.3 5.5 5.2

Order/Sales (x) 2.3 2.5 2.4 2.4

Order inflows 20,529 21,937 22,595 23,273

% chg 17.9 6.9 3.0 3.0


CMP `54

Target Price -

Investment Period -

Stock Info

Sector

Net Debt (` cr) 5,487

Bloomberg Code

Shareholding Pattern (%)

Promoters 37.2

MF / Banks / Indian Fls 14.1

FII / NRIs / OCBs 12.1

Indian Public / Others 36.7

Abs. (%) 3m 1yr 3yr

Sensex 4.2 9.6 20.5

Punj Lloyd (1.1) (11.4) (70.3)

2

19,461

5,898

PUJL.BO

PUNJ@IN

1,725

1.5

66/42

604,918

Infrastructure

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

Face Value (`)

BSE Sensex

Nifty

Reuters Code

022-39357800 Ext: 6842

[email protected]

Performance Highlights

3QFY2013 Result Update | Infrastructure

February 11, 2013


2/11

Punj Lloyd | 3QFY2013 Result Update

February 11, 2013 2

Exhibit 1:2QFY2013 performance (Consolidated)

Total Expenditure 2,590 2,644 (2.1) 2,464 5.1 7,542 6,917 9.0

OPM (%) 10.1 5.8 427bp 11.3 (120) bp 10.6 7.3 327bp

Interest 198 162 22.2 208 (4.7) 589 405 45.3

Depreciation 88 89 (1.2) 93 (5.1) 275 229 20.0

Non Operating Income 3 195 (98.6) 4 (23.2) 11 266 (96.0)

Nonrecurring items - - - - - - - -

Tax 8 33 (74.2) 43 (80.2) 81 86 (5.4)

Share of Profits/ (Losses) of Assoc. 8 (5) (260.7) (4) (310.1) 3 (8) (138.2)

Share of Profits/ (Losses) of MI 2 1 180.3 12 (85.3) 16 (1) (2,221.3)

PAT (%) 0.3 2.5 (220)bp (0.6) 95bp (0.3) 1.1 (138)bp

Adj. PAT (%) 0.3 2.5 (220)bp (0.6) 95bp (0.3) 1.1 (138)bp

-


Subdued top-line performance

Punj reported a revenue of `2,881cr in 3QFY2013, indicating a growth of

2.6% yoy.As per the Management, high working capital and borrowing costs

continue to pose challenges. Hence, it is exploring avenues of paring this debt and

improving the quality of its balance sheet.

Going forward, the company would be focusing on the following:

1) Bringing down the cost of debt by shifting it to some other geography where

cost of debt is lower.

2) Improving profitability and working capital cycle.

Out of the total Libyan orders (~`4,200cr), slow moving orders consist of

`2,000cr as of 3QFY2013. The company has commenced operations at SirteBasin.


3/11


February 11, 2013 3

Exhibit 2:Revenue Sector wise (`cr)


Exhibit 3:Revenue Geography wise (`cr)


Profit from associates leads to profitability

The companys EBITDAM for the quarter stood at 10.1%, an improvement of

427bp on a yoy basis. Going ahead, the Management is confident that the

company will be able to maintain its EBITDA margin at 8-11%. Based on

9MFY2013 performance, we have revised our EBITDAM estimate to 10.2% (earlier

estimate was of 9%) for FY2013 and FY2014. The interest cost came in at`198cr,

a jump of 22.2% yoy but a fall of 4.7% on a sequential basis while depreciation

was flat yoy at `88cr in 3QFY2013. On the bottom-line front, the company

reported a PAT of `9cr in 3QFY2013 vs `70cr in 3QFY2012; that too owing to

profits from its associates (which reported a profit of `8cr vs a loss of `5cr in

3QFY2012) and healthy performance at the operating level.

Exhibit 4:Better execution helps EBITDAM to improve


Exhibit 5:Profits from associates boost PAT


181

202

164

255

288

314

291

8.0

8.4

5.8

8.4

10.4 11.3 10.1

-

2.0

4.0

6.0

8.0

10.0

12.0

0

50

100

150

200

250

300

350

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13

EBITDA (` cr, LHS) EBITDAM (%, RHS)

(0.6)

1.0

2.5

0.3

(0.5) (0.6)

0.3

(1.0)

(0.5)

-

0.5

1.0

1.5

2.0

2.5

3.0

(30)

(20)

(10)

0

10

20

30

40

50

60

70

80

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13

PAT (` cr, LHS) PATM (%, RHS)


4/11


February 11, 2013 4

Order book analysis

The companys order book stood at `23,690cr, a decline of 19.3% yoy, thus

converting into an order book to sales ratio of 2.0x FY2013 revenues. The

company has secured orders worth `1,300cr and `5,244cr in 3QFY2013 and

9MFY2013 respectively. The order book is dominated by the infrastructure

(39.7%), process (25.7%) and pipeline (14.7%) segments. Geographically, Middle

East, CIS and Africa contribute 44.4% to the order book, followed by South Asia

(30.9%) and South East Asia (24.6%). During the quarter, the company has also

secured its maiden order in Hong-Kong for construction of Diamond Hill station.

Exhibit 6:Order backlog Sector wise (`cr)


Exhibit 7:Order backlog Geography wise (`cr)



5/11


February 11, 2013 5

Outlook and valuation

Based on its 9MFY2013 performance, we are revising our estimates for FY2013

and FY2014. We have not revised our revenue estimates for FY2013 and FY2014.

EBITDAM has been revised to 10.2% for both FY2013 and FY2014. However, we

are now estimating a loss of`14cr (earlier a profit of`60cr) and a profit of`98cr

(earlier a profit of`107cr) for FY2013 and FY2014, respectively.

Exhibit 8:Change in estimates

Revenues (`cr) 11,892 11,892 - 13,116 13,116 -

EBITDA Margin (%) 9.0 10.2 13.3 9.0 10.2 13.3

PAT (`cr) 60 (14) - 107 98 (7.8)


In order to lower its interest cost, Punj is looking to reduce its debt by sale of

non-core assets, and replacing Indian debt with foreign debt. However, given the

difficult environment, we believe these steps would not yield results before the next

six to nine months. Further, there is no clarity on timeframe of recovering various

outstanding claims as legal issues such as litigation and arbitration usually are

lengthy processes.

Exhibit 9:Angel EPS forecast vs consensus

FY2013E (0.4) 0.4 -

FY2014E 3.0 4.1 (27.7)


Company background

Punj Lloyd (Punj) is a diversified global engineering and construction company,

with presence across the infrastructure (34% of order book), pipeline (20%), and

process segments (20%). Punj Group has two main entities Punj, headquartered

in India and SEC in Singapore. Punj started as a pipeline company in 1982. Over

the years, Punj, with the help of various JVs and acquisitions, has increased its

expertise in basic infrastructure projects, such as roads, power, cross-country

pipelines, urban infrastructure, tankages and terminals and process plants, among

others. Punj was listed in 2006, and in the same year, it acquired SEC and Simon

Carves.


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February 11, 2013 6

Exhibit 10:Recommendation Summary

ABL 229 268 Buy 1,500 1,866 2,131 19.2 22.6 24.3 27.0 9.3 10.1 9.4 8.5 2.9CCCL 15 - Neutral 2,048 2,262 2,522 11.0 (0.5) 1.5 2.7 - - 9.9 5.6 2.2

IRB Infra 117 164 Buy 3,133 3,843 4,212 15.9 14.9 16.9 17.8 9.3 7.9 6.9 6.6 2.8

ITNL 195 225 Buy 5,606 6,564 7,054 12.2 25.6 26.3 29.0 6.5 7.6 7.4 6.7 1.5

IVRCL 33 33 Neutral 6,178 4,249 6,897 5.7 0.6 0.3 3.3 136.8 55.2 105.4 9.8 5.0

JP Assoc. 73 100 Buy 12,853 13,842 15,863 11.1 4.8 3.7 4.6 (2.8) 15.1 19.9 15.9 -

L&T 1,490 1,788 Buy 53,171 60,666 69,525 14.3 64.3 63.2 75.1 8.1 23.2 23.6 19.9 2.7

NCC 40 44 Accu. 5,250 5,863 6,576 11.9 1.4 3.1 4.1 71.0 28.4 12.9 9.7 3.3

Sadbhav 121 168 Buy 2,676 2,344 2,804 2.4 9.3 7.2 8.7 (3.5) 13.0 16.9 13.9 2.9

Simplex In. 167 251 Buy 6,010 6,906 8,053 15.8 18.1 23.2 31.3 31.7 9.2 7.2 5.3 2.4

Unity Infra 37 59 Buy 1,973 2,180 2,455 11.5 14.0 13.3 15.0 3.5 2.7 2.8 2.5 2.2


Exhibit 11:SOTP break-up

ABL 86 32 - - 182 68 - - - - 268

CCCL 16 100 - - - - - - - - 16

IRB Infra 52 32 - - 113 69 4 3 - - 164

ITNL 74 33 - - 121 54 - - 30 13 225

IVRCL 17 46 - - - - 20 54 - - 37

JP Assoc. 27 27 30 30 - - - - 43 43 100

L&T 1,351 76 - - - - 437 24 - - 1,788

NCC 25 57 - - 7 16 - - 12 27 44

Sadbhav 70 41 - - 99 59 - - - - 168

Simplex In. 251 100 - - - - - - - - 251

Unity Infra 52 88 - - 7 12 - - - - 59



7/11


February 11, 2013 7

Profit & Loss Statement (Consolidated)

Other operating income

% chg 53.6 (12.3) (22.1) 29.7 12.6 10.3

Net Raw Materials 3,751 3,770 2,384 3,100 3,449 3,804

Other Mfg costs 6,429 4,968 3,900 5,207 5,887 6,493

Personnel 1,292 1,345 1,127 1,353 1,344 1,482

Other - - - - - -

% chg (36.4) (17.2) 99.7 23.3 35.2 10.3

(% of Net Sales) 3.7 3.5 8.9 8.5 10.2 10.2

Depreciation& Amortisation 177 227 269 299 380 408

% chg (51.7) (47.8) 233.5 30.5 39.1 11.7

(% of Net Sales) 2.2 1.3 5.6 5.7 7.0 7.1

Interest & other Charges 352 387 463 633 773 872

Other Income 71 108 21 227 27 124

(% of PBT) (406) (77) 131 118 31 68

Share in profit of Associates - - - - - -

% chg (103.9) 708.0 (111.2) 1,115.3 (55.2) 110.6

Extraordinary Expense/(Inc.) (19) (162) - - - -

Tax 226 137 66 81 104 62

(% of PBT) 16,925.9 654.4 417.4 41.8 120.0 34.0

Add: Share of earnings of asso. (7) 10 2 (11) 2 (12)

Less: Minority interest (MI) 6 (2) (3) (9) 1 (10)

Prior period items - - (8) - - -

% chg (173.2) 51.1 (83.6) (254.3) (115.4) (795.1)(% of Net Sales) (2.0) (3.5) (0.7) 0.9 (0.1) 0.8

% chg (173.2) 51.1 (83.6) - - -

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

previous year numbers


8/11


February 11, 2013 8

Balance Sheet (Consolidated)

Equity Share Capital 61 66 66 66 66 66Preference Capital - - - - - -

Reserves& Surplus 2,424 2,961 2,912 2,854 2,825 2,910

Minority Interest 42 42 74 87 87 87

Total Loans 3,559 4,455 3,881 4,944 5,745 6,281

Deferred Tax Liability 174 184 156 171 171 171

Gross Block 2,653 3,120 3,365 4,154 4,474 4,795

Less: Acc. Depreciation 777 943 1,113 1,368 1,748 2,155

Capital Work-in-Progress 297 160 82 267 232 224

Goodwill - - - - - -

Long Term Loan and Advances 147 152 152 152

Cash 812 611 1,215 973 796 1,095

Loans & Advances 1,053 1,042 990 1,271 1,431 1,579

Other 6,430 7,175 7,139 8,756 10,356 11,422

Current liabilities 4,895 3,843 5,123 6,470 7,186 7,984

Mis. Exp. not written off 0 - - - - -




9/11


February 11, 2013 9

Cash Flow statement (Consolidated)

Profit Before Tax 1 21 16 193 87 182

Depreciation 177 227 269 299 380 408Change in Working Capital 983 1,786 (1,369) 552 1,045 416

Less: Other income 71 108 21 227 27 124

Direct taxes paid 226 137 66 81 104 62

(Inc.)/Dec. in Fixed Assets (653) (338) (166) (974) (285) (314)

(Inc.)/Dec. in Investments (115) 279 (2) 13 - -

(Inc.)/Dec. in loans and advances - - (147) (5) - -

Other income 71 108 21 227 27 124

Issue of Equity - 648 (8) 2 - -

Inc./(Dec.) in loans 1,952 896 (575) 1,064 800 536

Dividend Paid (Incl. Tax) 11 6 6 6 14 14

Others (20) (5) (80) (195) 3 (22)

Inc./(Dec.) in Cash 122 (201) 604 (242) (177) 299




10/11


February 11, 2013 10

Key Ratios

P/E (on FDEPS) - - - 18.8 - 17.5P/CEPS - - 8.2 4.4 4.7 3.4

P/BV 0.6 0.6 0.6 0.6 0.6 0.6

Dividend yield (%) 0.7 0.3 0.3 0.3 0.8 0.8

EV/Sales 0.4 0.5 0.5 0.5 0.6 0.5

EV/EBITDA 10.2 15.3 6.0 6.3 5.5 5.2

EV / Total Assets 0.7 0.7 0.6 0.7 0.8 0.7

Order Book/Sales (x) 1.7 2.7 2.3 2.5 2.4 2.4

EPS (Basic) (7.9) (10.9) (1.8) 2.8 (0.4) 3.0

EPS (fully diluted) (7.2) (10.9) (1.8) 2.8 (0.4) 3.0

Cash EPS (2.1) (4.1) 6.3 11.8 11.0 15.2

DPS 0.4 0.2 0.2 0.2 0.4 0.4

Book Value 81.9 91.2 89.7 87.9 87.1 89.6

EBIT margin 2.2 1.3 5.6 5.7 7.0 7.1

Tax retention ratio - - - 58.2 (20.0) 66.0

Asset turnover (x) 2.6 1.7 1.3 1.6 1.6 1.6

ROIC (Post-tax) - - - 5.3 (2.2) 7.4

Cost of Debt (Post Tax) - - - 8.3 (2.9) 9.6

Leverage (x) 0.7 1.1 1.1 1.1 1.5 1.7

Operating ROE - - - 1.9 (1.1) 3.8

ROCE (Pre-tax) 4.9 2.0 6.2 7.9 9.8 10.1

Angel ROIC (Pre-tax) 5.7 2.2 7.1 9.2 10.9 11.3

ROAE (9.2) (13.2) (2.0) 3.1 (0.5) 3.4

Asset Turnover (Gross Block) 5.0 3.6 2.5 2.8 2.8 2.8

Inventory / Sales (days) 88 145 213 191 203 205

Receivables (days) 73 85 98 80 87 94

Payables (days) 125 151 107 102 117 119

WC cycle (ex-cash) (days) 64 122 165 113 125 134

Net debt to equity 1.1 1.3 0.9 1.4 1.7 1.7

Net debt to EBITDA 6.2 10.5 3.7 4.4 4.1 3.9

Interest Coverage 0.7 0.4 1.0 0.9 1.1 1.1




11/11


February 11 2013 11

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbrokling.com

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Disclosure of Interest Statement Punj Lloyd

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

punj lloyd, 12th february, 2013

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