Dear All,
Forwarding you the Result Update on Consolidate Construction Consortium for 4QFY2011 with a Sell recommendation and a Target Price of `38 (12 months).
CCCL posted a disappointing set of numbers for the fourth consecutive quarter below our and street expectations. The top line came in flat mainly on account of slow-moving infrastructure orders. However, the blow in the company’s performance came from the big drop in the margin. CCCL’s bottom line was also disappointing, due to sedate top-line growth and a huge margin decline. We are revising our estimates downwards for FY2012 and FY2013 to reflect the same and are downgrading the target multiple to 9x from 10x. Going ahead, we expect margins to be under pressure and the stock to get de-rated on the bourses. Hence, we further downgrade the stock to Sell from Neutral.
Poor show on all fronts: CCCL’s top line grew by mere 1.1% yoy to `643.0cr (`636.3cr), which was marginally lower than our estimate of `675.0cr. However, the shocker came at the operating front, as the company posted abysmal EBITDA margin of 3.5% (11.4%), a drop of 790bp, against our expectations of a 150bp dip. On a sequential basis as well, margin saw a decline of 620bp. The main reason for the margin decline was the increase of 710bp and 170bp yoy in materials cost and subcontracting cost, respectively, as a percentage of sales. The company cited error in the estimation of material cost for fixed price contracts, which led to this disaster. This translated in the bottom line declining by 95.5% yoy during the quarter.
Outlook and valuation: CCCL has been consistently disappointing on the top-line front and posting erratic numbers on the bottom-line front for the last four quarters. The order inflow is showing signs of revival, but the critical execution leg is dragging the performance of the company. CCCL has always been commanding a premium over peers due to its superior return ratios, which are now headed southwards. Hence, we have revised our numbers downwards to factor in the same. We further downgrade the stock to Sell (Neutral) with a revised target price of `38.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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