Dear All,
Forwarding you the Result Flash on Hindustan Construction Co. for 4QFY2011 with a Neutral recommendation.
Key highlights from the results
For 4QFY2011, HCC’s numbers came in line with our expectations. On the top line front, HCC reported growth of 10.8% yoy to `1,202cr (`1085cr) almost as per our estimate of `1,217cr. The muted revenue performance was due to slow moving hydro projects and low contribution from AP projects as expected. EBITDAM surprised positively with an improvement of 250bps and stood at 13.8% (11.3%) for the quarter against our estimates 90bps improvement. PAT de-grew by 47.4% yoy to `22.6cr (`43.0cr) in line with our estimate of de-growth of 44.7%. Poor performance on bottom line was due to higher depreciation cost (118.4% increase yoy) and swell in interest cost (103.8% jump on yoy basis, attributed by increase in debt levels and hardening of interest rates) and higher tax rate (50.2%). HCC has redeemed FCCB during 4QFY2011 with an outflow of ~`600cr and the same has been funded by additional debt which will further increase its interest cost. The current outstanding order book of the company stands at `16,187cr (excluding the disputed and L1 orders worth `1,940cr and `1,208cr respectively) Going ahead, we expect HCC’s interest cost to increase on the back of higher debt requirements to fund its working capital and rising interest rates regime. We believe that HCC’s stock performance depends on the outcome of the ongoing Lavasa legal wrangle with the Ministry of Environment and Forests (MOEF). Owing to these concerns we maintain our Neutral view on the stock.
Quarterly performance (Standalone)
| Y/E March (` cr) | 4QFY11 | 4QFY10 | % chg(yoy) | 3QFY11 | % chg(qoq) | FY2011 | FY2010 | % chg(yoy) |
| Income from Operations | 1,202.1 | 1,085.0 | 10.8 | 1,002.5 | 19.9 | 4,084.5 | 3,629.2 | 12.5 |
| Total Expenditure | 1,035.9 | 962.0 | 7.7 | 876.6 | 18.2 | 3,553 | 3,201 | 11.0 |
| Operating Profit | 166.2 | 123.0 | 35.1 | 125.9 | 32.0 | 531.2 | 427.9 | 24.1 |
| OPM (%) | 13.8 | 11.3 | 250bp | 12.6 | 120bp | 13.0 | 11.8 | 120bp |
| Interest | 90.3 | 44.3 | 103.8 | 74.8 | 20.7 | 290 | 205.2 | 41.3 |
| Depreciation | 44.0 | 20.1 | 118.4 | 38.2 | 15.2 | 153 | 113.9 | 34.0 |
| Non Operating Income | 13.4 | 4.2 | 220.6 | 0.5 | 2648.8 | 23 | 13.0 | 77.6 |
| Nonrecurring items | 0.0 | 0.0 | - | 0.0 | - | - | - | - |
| Profit Before tax | 45.4 | 62.8 | (27.7) | 13.4 | 238.9 | 111.7 | 121.8 | (8.3) |
| Tax | 22.8 | 19.8 | 15.0 | 5.5 | 318.1 | 41 | 40.4 | 0.7 |
| PAT | 22.6 | 43.0 | (47.4) | 7.9 | 184.6 | 71.0 | 81.4 | (12.8) |
| PAT (%) | 1.9 | 4.0 | (210)bp | 0.8 | 110bp | 1.7 | 2.2 | (50)bp |
| FDEPS (`) | 0.4 | 0.7 | (47.4) | 0.1 |
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