Buy ITD Cementation; target of Rs 80: HDFC Securities
HDFC Securities’ research report on ITD Cementation
3QFY20 weak operating performance: ITD delivered Rev/EBIDTA/APAT miss of 2/11/49%. Subsidiaries reported Rev/EBIDTA/PBT loss of Rs 1.9bn/87mn/45mn. Muted execution was on account of Rs 60bn of new order wins still in initial stages of mobilization. Fixed costs absorption on weak revenue base impacted profitability. Robust order wins/backlog sets base for strong execution: ITD has won new orders worth Rs 56bn (9MFY20) taking total order book to Rs 126bn. Bid pipeline is strong at Rs 120bn with 50%+ marine projects up for grabs. ITD expects Rs 60bn of new wins to move into execution over next 6months, with revenue run rate hitting Rs 10bn/qtr from 2QFY21. ITD indicated that execution pick may result in Rs 40bn+ FY20 rev. EBIDTA margins may remain 10%+. This shall augur well for re-rating. Net debt reduces Rs 200mn QoQ, NWC days increase to 115: ITD’s consolidated net debt decreased Rs 200mn QoQ to Rs 4.4bn. About Rs 2.3bn of the debt is related to the Bengaluru elevated metro project. This project is expected to be completed by Jul/Dec-20E and WC debt will gradually unwind. Increase in urban Infra share in order book has resulted in NWC days increasing to 115 vs. historical average of 45-50. Consolidated net D/E stands at 0.5x.
ITD’s 3Q/9MFY20 order inflows have been robust at Rs 26/56bn ex Rs 3.5bn L1. Kolkata HC has given green signal to stuck Kolkata metro and ITD maintains no write offs in this project. We maintain BUY on ITD with TP of Rs 80/sh (12x Mar-21E EPS).
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