Motilal Oswal - Sadbhav Engineering (SADBHAV) MOSL: SADBHAV ENGG. (Buy)-Miss on execution hurts operating performance

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Motilal Oswal

MOSL: SADBHAV ENGG. (Buy)-Miss on execution hurts operating performance

Sadbhav Engg.: Miss on execution hurts operating performance

(SADE IN, Mkt Cap USD0.8b, CMP INR396, TP INR460, 16% Upside, Buy)

Operating performance below expectations: Revenue grew 8.1% YoY to INR9.4b, below our estimate of INR9.9b. EBIDTA came in at INR1.1b (+12.5% YoY), below our estimate of INR1.2b. Operating margin of 11.3% (+50bp YoY) was in line with our estimate. PAT rose 18% YoY to INR618m, below our estimate of INR657m, given below expected execution.
Revenue growth led by robust execution in transport: Transport segment (85% of revenue) grew at 15% YoY, supported by growth in BoT segment revenue (in-house HAM projects; +505% YoY to INR2.5b). EPC revenue within the transport segment declined 16.5%, as third-party order book available for execution declined on a YoY basis. Irrigation segment (6% of revenue) declined 26% YoY on account of lower order backlog available for execution, seasonal factors, and multiple projects reaching completion. Mining sector declined 16% YoY to INR840m.
Margin expansion led by execution of better-margin orders: Operating margin stood at 11.3% (+50bp YoY) in 3QFY18, led by execution of in-house HAM projects (where margins are better compared to third-party EPC contracts) and also value-accretive projects. SADE maintained its guidance of 11.5% growth in FY18, given pick-up in execution of in-house HAM projects.

15/02/2018 6 EN

Underlying

Sadbhav Engineering

Sadbhav Engineering Limited is a construction company. The Company is engaged in the construction and maintenance of roads and highway, and irrigation system (canal). The Company is also engaged in the site preparation for mining, including overburden removal and other development. The Company's segments include EPC Contracts and BOT (Toll & Annuity). The Company has projects in the roads and highways, bridges, rail metro projects, irrigation supporting infrastructure, and the mining sector. Its engineering, procurement, construction (EPC) projects in roads and highways are Rohtak-Hissar section, Malavalli-Pavagada section, Ambala-Kaithal section, and Yamunanagar-Saha Barwala-Panchkula section of Haryana. The Company's Mining sector deals with excavation of overburden and mining of minerals, such as coal, uranium and lignite. It has excavation work at Mangrol lignite mines, Gujarat. It is also engaged in the construction of earthen dams, syphon, remodeling and improvement of canals.

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INE226H01026 National Stock Exchange of India India

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Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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MOSL: SADBHAV ENGG. (Buy)-Miss on execution hurts operating performance

Increased risk weighs on SADBHAV ENGINEERING, penalising its rating down to Slightly Negative

Monthly LMI Update Independent Investment Research

Sadbhav Engineering's Q3FY20 results (Outperformer) - A disappointing quarter; Asset monetisation to improve execution

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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