Company Report | Q1FY12 Result Update

LONG TERM INVESTMENT CALL

28 July 2011 Industry CMP (INR) Target (INR) Upside / (Downside) (%) 52 week High/Low (INR) Market Cap (INR MN) 3M Avg. Daily Vol (000) P/E (FY13e) Shareholding Pattern (%)
Promoters Non Institutions 32% 39%

Accumulate

Infrastructure 30 34 13 72 / 28 18,621 4,910 23

Q1FY12 Result Highlights Hindustan Constructions Co. Ltd. (HCC) reported revenue and net profit below Unicons expectation for Q1FY12. While slowdown in order intake and execution was evident, higher than expected interest charge and tax provision took toll on the bottom-line of the company. Revenue at INR 10.5bn grew ~6% YoY, below our estimates of INR 11.1bn. HCC, through better cost control was able to maintain its operating profit margin. The operating profit margin marginally grew by 40 bps to 13% compared to 12.6% during same quarter last year. Redemption of FCCB through fresh borrowings and higher working capital cycle caused 61.5% spike in its interest cost to INR 933Mn. The tax provision for the quarter was 53% of PBT higher than normal tax rate. This led to decline in its net profit by 90% YoY to 29Mn Order-book and Other Update Order book: The current order-book of the company is ~INR 170bn. This does not include contract worth INR 19.4bn in the state of J&K to be executed in JV due to legal issues. The current order-book is ~4x its FY11 revenue. HCC is lowest bidder for two project worth INR 20.7bn. While Company saw weak order inflows during the quarter under review, the outlook for the sector remains weak due to higher interest rate regime in the economy, leading to deferment of capex by private players. Lavasa: Subject to the pre-conditions laid by the Expert Advisory committee, the Ministry of Environment and Forests has agreed to allow start of work at site. Lavasa Corporation Ltd. has approached to the Mumbai High Court to hear the so called pre-conditions and represent its case. The case is adjourned and its hearing is likely in Q2FY12. Stake sale at subsidiary level to raise cash: HCC aims to raise ~INR 2.4bn through dilution of 14.5% stake in its subsidiary HCC Concessions Ltd. (HCL) to Xander Group. HCL designs, finances, builds and operates transport infrastructure. Outlook and Valuations At the current market price, stock trades at PE multiple of ~23x its consensus FY13e. Given the higher interest rate regime, lower order intake visibility over next 2-3 quarters and its RoE at ~5% in FY13, we reduce our price target to INR 34/share, Accumulate

Institutions 29%

Stock Performance
HCC 75 65 55 45 35 25 Oct Jul Apr M ay M ar Sep Dec Aug N ov Feb Jun Jan NSE Nifty

Performance (%) 1M Month -3.3% -2.0% 3 Months -17.0% -5.9% Actual 10,579 1,379 29 1 Year -53.6% 1.1%
in Mn)

Company Nifty Particulars Total Income EBIDTA Reported PAT

Estimates 11,106 1,433 78

* Source: ACEEquity, Unicon Research Analyst Falgesh Sanghvi | fsanghvi@unicon.in

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@unicon.in

Financials Particulars Income from Operations Operating Expenditure Consumption of materials Employees Cost Construction Expenses Other expenditure EBITDA EBITDA (%) Depreciation EBIT EBIT (%) Interest (Net) Other Income PBT Tax Expense Tax Expense (%) PAT PAT (%) EPS
Source: Company, Unicon Research

(INR in mn)

Q1FY12 10,579 9,200 2,891 1,126 4,706 478 1,379 13.0 392 987 9.3 933 7 62 33 53.3 29 0.3 0.05

Q1FY11 9,954 8,696 2,967 1,094 4,208 427 1,258 12.6 347 911 9.2 577 31 364 81 22.3 283 2.8 0.47

FY11 40,907 35,534 11,973 4,676 16,993 1,892 5,373 13.1 1,527 3,846 9.4 2,899 170 1,117 407 36.4 710 1.7 1.17

YoY% 6.3 5.8 (2.6) 2.9 11.8 12.0 9.7 40 bps 13.1 8.3 18 bps 61.5 (76.5) (83.1) (59.5) (89.9) -257 bps

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@unicon.in

Unicon Investment Ranking Methodology

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