ITD Cementation 1Q CY 2013

7/30/2019 ITD Cementation 1Q CY 2013

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Please refer to important disclosures at the end of this report 1

Y/E December (` cr) 1QCY13 1QCY12 % chg. (yoy) 4QCY12 % chg. (qoq)Total operating income 355 384 (7.6) 313 13.2Operating profit 35 49 (29.0) 33 6.1

OPM (%) 9.8 12.8 (295)bp 10.5 (66)bp

Adj. PAT 6 12 (53.3) 1 306.8Source: Company, Angel Research

For 1QCY2013, ITD Cementation reported mixed set of numbers. The revenue

for the quarter came at `355cr, 4.5% higher than our expectation of `339cr.

However, the company disappointed on the operating margin front which

contracted by 295bp yoy to 9.8%, against our estimate of 11.3%, mainly onaccount of higher employee cost as a percentage of net sales. Recurring PBT

came in at `1.3cr, however, significant other income led to a higher net profit of

`6cr, against our estimate of `5cr.

Strong order book to drive revenue

The JV of ITD Cementation with its parent company, ITD (49% subsidiary), has

bagged two order of `546cr and `752cr from Delhi Metro Rail Corporation

(DMRC). Additionally, ITD cementation (standalone) has bagged an order worth

~`115cr in Ghaziabad for the construction of flyovers. The companys current

order book stands at `3,680cr (as on 31st march, 2013). We expect the company

to maintain the order book to sales at ~2.2 for both CY2013E and CY2014E. Onaccount of strong order book and new order visibility, we expect the company to

post a revenue CAGR of 11.0% over CY201214E to `1,602cr.

Outlook and valuation:

We expect the companys revenue to post a 10.0% CAGR over CY201214E to

`1,573cr. The operating margin for the company is expected to hover around

11.0% for the same period. Further, we expect the interest rate to soften by

~114bp to 15.5% for CY2014E resulting the net profit to grow at a CAGR of

18.6% over CY2012-14E at `31cr. We maintain ourBuy recommendation on thestock with a revised target price of `234 with a target P/BV of 0.6x for CY2014E,given the strong order book and visibility of new order inflows.Key financials (Standalone)

Y/E Dec. (` cr) CY2010 CY2011 CY2012 CY2013E CY2014ENet sales 1,057 1,283 1,300 1,430 1,573% chg 8.7 21.4 1.3 10.0 10.0

Adj. net profit 9 23 22 22 31% chg 72.0 146.2 (2.5) (0.1) 40.9

OPM (%) 9.2 10.6 12.1 11.1 11.0EPS (`) 7.9 19.6 19.1 19.1 26.9

P/E (x) 22.7 9.2 9.4 9.5 6.7

P/BV (x) 0.6 0.5 0.5 0.5 0.5

RoE (%) 2.6 6.1 5.6 5.3 7.1RoCE (%) 7.5 10.1 11.8 11.4 12.0

EV/Sales (x) 0.6 0.6 0.6 0.6 0.5

EV/EBITDA (x) 6.8 5.6 4.9 5.0 4.7

Source: Company, Angel Research

BUYCMP `180

Target Price `234

Investment Period 12 Months

Stock Info

Sector

Debt 640

Bloomberg Code

Shareholding Pattern (%)

Promoters 69.6

MF / Banks / Indian Fls 2.8FII / NRIs / OCBs 0.8

Indian Public / Others 26.8

Abs. (%) 3m 1yr 3yr

Sensex 1.2 21.6 16.1

ITD cementation (6.6) 0.9 17.0

Nifty 5,995

Reuters Code ITCM.BO

ITCE IN

Face Value (`) 10

BSE Sensex 19,722

52 Week High / Low 276/163

Avg. Daily Volume 2,386

Beta 0.4

Construction

Market Cap (` cr) 207

Tejashwini Kumari022-39357800 Ext: 6856

[email protected]

ITD Cementation IndiaPerformance highlights

1QCY2013 Result Update | Construction

May 14, 2013


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ITD Cementation India | 1QCY2013 Result Update

May 14, 2013 2

Exhibit 1:1QCY2013 performance (Standalone)

Y/E Dec. (` cr) 1QCY13 1QCY12 % chg. (yoy) 4QCY12 % chg. (qoq) CY2012 CY2011 % chgTotal operating income 355 384 (7.6) 313 13.2 1,300 1,283 1.3Net raw material 128 148 (13.9) 99 29.5 456 463 (1.5)(% of Sales) 36.0 38.6 31.5 35.1 36.1

Employee cost 41 33 23.7 38 9.4 143 124 15.5

(% of Sales) 11.6 8.7 12.0 11.0 9.7

Other Expenses 151 153 (1.6) 144 4.6 544 560 (2.9)

(% of Sales) 42.5 39.9 46.0 41.8 43.6

Total expenditure 320 335 (4.5) 280 14.0 1,143 1,147 (0.3)Operating profit 35 49 (29.0) 33 6.1 157 136 15OPM (%) 9.8 12.8 (295)bp 10.5 (66)bp 12.1 10.6 147bp

Interest 26 27 (3.2) 27 (4.9) 103 93 11.4

Depreciation 8 8 (6.8) 10 (17.6) 36 34 5.3

Other income 7 2 299.0 2 298.5 9 13 (30.2)PBT 8 16 (50.5) (2) (465.4) 27 22 21.3(% of Sales) 2.2 4.1 (0.7) 2.1 1.7

Tax 2 4 (41.4) (4) (162.6) 5 (1) (963.6)

(% of PBT) 28.2 23.8 164.5 17.8 (2.5)

Reported PAT 6 12 (53.3) 1 306.8 22 23 (2.5)PATM (%) 1.6 3.1 0.4 1.7 1.8


Exhibit 2:Actual vs. Angel estimate (1QCY2013)

Actual (` cr) Estimate (` cr) % variationTotal operating income 355 339 4.5Operating profit 35 38 (9.0)

OPM (%) 9.8 11.3 (146)bp

Adj. PAT 6 5 18.9Source: Company, Angel Research

Top-line better than expected, operating margin disappoints

The revenue for the quarter came at `355cr, 4.5% higher than our expectation of

`339cr. On yoy basis the revenue declined by 7.6%, however, it witnessed a

growth of 13.2% on qoq basis. The company disappointed on the operating

margin front which contracted by 295bp yoy to 9.8%, against our estimate of

11.3%, mainly on account of higher employee cost as a percentage of net sales as

the company gave wage hike in the quarter.Recurring PBT for the quarter came in

at `1.3cr. The company reported other income of `7cr which included `4cr of

income tax refund and the rest amount is interest refund from Kolkata Metro.

Consequently, the bottomline stood at `6cr against our estimate of `5cr.


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May 14, 2013 3

Exhibit 3:Delay in project execution weighs revenue inflow


Exhibit 4:Higher employee cost led to margin contraction


344

335

292

327

384

332

271 3

13 3

55

29.7 31.4

18.0

7.311.5

(0.7)

(7.3)(4.0)

(7.6)

(10)

0

10

20

30

40

0

100

200

300

400

500

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

3QCY12

4QCY12

1QCY13

(%)

(`

cr)

Revenue (LHS) yoy growth (RHS)

27

32

33

44

49

41

34

33

35

7.9

9.4

11.4

13.5 12.8 12.3 12.7

10.59.8

0

3

6

9

12

15

0

10

20

30

40

50

60

1QCY11

2QCY11

3QCY11

4QCY11

1QCY12

2QCY12

3QCY12

4QCY12

1QCY13

%

(`

cr)

EBITDA (LHS) EBITDA Margin (RHS)


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May 14, 2013 4

Investment arguments

Strong order book to drive revenue

The JV of ITD Cementation with its parent company, ITD (49% subsidiary), hasbagged two order of `546cr and `752cr from Delhi Metro Rail Corporation

(DMRC). The first project includes construction of a 9,035m long elevated metro

track along with eight elevated stations along with architectural finishing, water

supply, sanitary installation and drainage works. The second project includes

tunneling and station building. Moreover, this JV has also bagged an order worth

~`50cr for water supply in Agartala. Additionally, ITD cementation (standalone)

has bagged an order worth ~`115cr in Ghaziabad for the construction of flyovers.

It has also bagged projects worth ~`100cr on specialist engineering works of

piling, civil works for power plant, water treatment plant etc.

The companys closing order book for CY2012 stood at `2,891cr and afterconsidering the order inflows during the 1QFY2013, the current order book stands

at `3,680cr (as on 31st March, 2013). We expect the company to maintain the

order book to sales at ~2.2 for both CY2013E and CY2014E.

Exhibit 5:Order Book break-up


Exhibit 6:Order book to sales ratio to be stable


Softening of interest rate to improve bottom-line

We expect some softening in the interest cost with the recent cuts in repo rate by

the RBI. Additionally, looking at the growth of the company, few banks are offering

lucrative interest rates to ITD Cementation. We expect the companys interest rate

to witness a downward trend adding directly to the companys bottom line, which

is expected to be `31cr in CY2014E.

Foray into the industrial segment long-term growth driver

The company had forayed into the industrial and power segments in 1HCY2012. It

is currently very cautious in taking orders in the power segments due to the

regulatory and financial issues involved. However, the company sees a huge

potential in the industrial segment. The company currently has 3 small orders,

totaling ~30-40cr in this segment, but it expects revenue inflow of ~400-500cr incoming 3-4years. The segment being a high-margin segment is expected to help

the company in expanding its operating margin going forward.

Hydro, Dams,Tunnels and

irrigation

projects30%

MRTS26%

Marine works

20%

Specialistworks12%

Transportation12%

2030

2905

2754

2889

3,1

81

3,5

02

2.09 2.75 2.152.22 2.22 2.23

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E

(OB/sales)

(OrderBook)

Order book OB/sales


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May 14, 2013 5

Financials

Revenue visibility to improve with strong order book

With a strong order book of `3,680 (as on March, 2013) we expect the revenue

visibility to improve. We expect the company to post a revenue CAGR of 10.0%

over CY201214E to `1,573cr.

Exhibit 7:Strong order book to drive revenue


On the operating expenses front, we expect the raw material cost to remain at

same levels as a percent of net sales. However, we expect the employee cost to

increase to 11.8% as a per cent of net sales against 11.0% for CY2012 on accountof wage hikes given. Thus, the operating margin is expected to contract by 108bp

at 11.0% in CY2014E. For the year ending December 2012, the companys

effective interest rate rose to 16.6% from 14.9% in CY2011. However, going

forward we expect the interest rate to come down to 15.5% for CY2014E. Also, for

the CY2012, the companys effective tax rate was only at 17.8% due to tax credit.

We expect the tax rate to normalalize at ~30% going forward. Consequently we

expect the company to post a profit CAGR of 18.6% at `31cr for CY2014E.

Exhibit 8:Higher employee cost to impact margin


Exhibit 9:Lower interest cost to improve profitability


973

1,0

57

1,2

83

1,3

00

1,4

30

1,5

73

22.2

1.5

8.7

21.4

1.3

10.0

0

5

10

15

20

25

0

300

600

900

1,200

1,500

1,800

CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E

(%)

(`

Cr)

Revenue (LHS) Revenue growth (RHS)

92

97

136

157

159

173

9.5 9.2

10.6

12.111.1 11.0

0

3

6

9

12

15

0

50

100

150

200

CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E

(%)

(`C

r)

EBITDA (LHS) EBITDA margin (RHS)

5 9 23 22 22 31

275.0

72.0

146.2

(2.5) (0.1)

40.9

(50)

0

50

100

150

200

250

300

0

5

10

15

20

25

30

35

CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E

(%)

(`Cr)

PAT (LHS) PAT growth (RHS)


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May 14, 2013 6

The company

ITD Cementation is a subsidiary of Thailand-based Italian Thai Development Public

Company Ltd. (ITD), which holds 70% stake in the company. ITD also provides its

knowhow, technologies and skilled personnel to ITD Cementation. ITD

Cementation provides EPC services to infrastructure projects in India. The company

has a leadership position in the foundation and piling work, which contributes

almost 45% to its revenue. The companys business operation areas include

construction of maritime structures, mass rapid transit systems, hydro power,

tunnels, dams, industrial structures, airports, highways, bridges, flyovers, tube

heading and foundation and specialist engineering.

Outlook and valuation

We expect the companys revenue to post a 10.0% CAGR over CY201214E to

`1,573cr. The operating margin for the company is expected to hover around

11.0% for the same period. Further, we expect the interest rate to soften by

~114bp to 15.5% for CY2014E resulting the net profit to grow at a CAGR of

18.6% over CY2012-14E at `31cr.

We maintain ourBuy recommendation on the stock with a revised target price of`234 with a target P/BV of 0.6x for CY2014E, given the strong order book andvisibility of new order inflows.Exhibit 10:One-year forward PBV band


Exhibit 11:Relative valuation

Company Year end Mcap(` cr) Sales(` cr) OPM(%) PAT(` cr) EPS(`) RoE(%) P/E(x) P/BV(x) EV/Sales(x)ITD Cementation CY2013E 207 1,430 11.1 22 19.1 5.3 9.5 0.5 0.6

CY2014E 207 1,573 11.0 31 26.9 7.1 6.7 0.5 0.5

Simplex Infra FY2014E 549 6,824 9.2 89 18.0 6.8 6.2 0.4 0.5

FY2015E 549 7,563 9.4 116 23.4 8.3 4.7 0.4 0.4


0

100

200

300

400

500

600

700

800

Jan

-08

Sep

-08

May

-09

Jan

-10

Sep

-10

May

-11

Jan

-12

Sep

-12

May

-13

(`)

Price 0.2x 0.4x 0.6x 0.8x


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May 14, 2013 7

Concerns

Proper execution of ongoing projects is necessary for the company as any

slowdown or freezing of projects either because of some approvals, clearance

or investment issues may adversely affect the companys performance , as itdirectly affects the companys revenue.

Disruption in the schedule of projects due to natural calamities is a big risk for

the company.

Volatility in raw-material prices in the coming years (i.e., steel and cement

prices) may put pressure on the companys margin.

Any further slowdown in the economy may adversely affect the companys

performance.


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May 14, 2013 8

Profit and Loss (Standalone)

Y/E December (` cr) CY2010 CY2011 CY2012 CY2013E CY2014ETotal operating income 1,057 1,283 1,300 1,430 1,573% chg 8.7 21.4 1.3 10.0 10.0Net Raw Materials 418 463 456 501 552

% chg 11.9 10.8 (1.5) 9.9 10.1

Other Mfg costs 238 305 284 312 345

% chg (12.1) 27.9 (7.0) 10.2 10.4

Personnel 102 124 143 169 186

% chg 22.0 21.6 15.5 17.9 10.0

Other 201 255 260 289 318

% chg 32.5 26.6 2.1 11.1 10.0

Total Expenditure 960 1,147 1,143 1,271 1,400

EBITDA 97 136 157 159 173% chg 5.0 40.5 15.4 1.1 9.0

(% of Net Sales) 9.2 10.6 12.1 11.1 11.0

Depreciation & Amortisation 31 34 36 38 39

EBIT 66 102 121 121 134% chg 7.3 54.0 18.8 (0.1) 10.5

(% of Net Sales) 6.3 7.9 9.3 8.5 8.5

Interest & other Charges 78 93 103 101 102

(% of loan) 14.8 14.9 16.6 15.8 15.5

Other Income 24 13 9 11 13

(% of Net Sales) 2.3 1.0 0.7 0.8 0.8

Recurring PBT (12) 9 18 20 32% chg 18.3 (178.9) 94.0 12.4 58.7

PBT (reported) 12 22 27 31 44Tax 3 (1) 5 9 13

(% of PBT) 23.3 (2.5) 17.8 30.0 30.0

PAT (reported) 9 23 22 22 31Extraordinary Expense/(Inc.) 0 0 - - -

ADJ. PAT 9 23 22 22 31% chg 72.0 146.2 (2.5) (0.1) 40.9

(% of Net Sales) 0.9 1.8 1.7 1.5 2.0

Basic EPS (`) 7.9 19.6 19.1 19.1 26.9Fully Diluted EPS (`) 7.9 19.6 19.1 19.1 26.9% chg 72.0 146.2 (2.5) (0.1) 40.9


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May 14, 2013 9

Balance Sheet (Standalone)Y/E December (` cr) CY2010 CY2011 CY2012 CY2013E CY2014ESOURCES OF FUNDSEquity Share Capital 12 12 12 12 12Reserves& Surplus 350 370 389 409 437

Shareholders Funds 361 381 400 420 449Total Loans 525 624 621 640 659

Long Term Provisions - 4 5 5 5

Deferred Tax (Net) - (8) (11) (11) (11)

Total Liabilities 886 1,002 1,016 1,054 1,102APPLICATION OF FUNDSGross Block 322 395 426 447 465

Less: Acc. Depreciation 165 197 233 271 310

Net Block 158 198 193 177 155Capital Work-in-Progress 12 3 14 14 14

Lease adjustment - - - - -

Goodwill - - - - -

Investments 37 41 47 47 47Long Term Loans and adv. - 93 103 103 103

Other Non-current asset - 0 0 0 0

Current Assets 1,014 1,181 1,234 1,289 1,416

Cash 35 23 12 5 4

Loans & Advances 131 161 116 127 140

Inventory 357 680 791 809 890

Debtors 491 317 315 348 382

Other current assets - - 0 0 0

Current liabilities 335 514 575 575 633

Net Current Assets 679 667 659 714 783Misc. Exp. not written off - - - - -

Total Assets 886 1,002 1,016 1,054 1,102


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May 14, 2013 10

Cash Flow (Standalone)

Y/E December (` cr) CY2010 CY2011 CY2012 CY2013E CY2014EProfit before tax 12 22 27 31 44

Depreciation 31 34 36 38 39Change in Working Capital 12 0 (3) (62) (70)

Direct taxes paid (3) 1 (5) (9) (13)

Others 59 (24) 19 (11) (13)

Cash Flow from Operations 111 33 74 (14) (12)(Inc.)/Dec. in Fixed Assets (39) (64) (41) (21) (18)

(Inc.)/Dec. in Investments (14) (4) (6) 0 0

(Incr)/Decr In LT loans & adv. 0 0 9 0 0

Others 17 5 3 11 13

Cash Flow from Investing (36) (62) (36) (10) (5)Issue of Equity 0 0 0 0 0

Inc./(Dec.) in loans 28 99 (3) 19 19

Dividend Paid (Incl. Tax) (2) (3) (2) (2) (2)

Others (77) (79) (44) 0 0

Cash Flow from Financing (51) 17 (50) 16 17Inc./(Dec.) in Cash 24 (12) (11) (7) (1)

Opening Cash balances 11 35 23 12 5Closing Cash balances 35 23 12 5 4


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May 14, 2013 11

Key Ratios (Standalone)

Y/E December CY2010 CY2011 CY2012 CY2013E CY2014EValuation Ratio (x)P/E (on FDEPS) 22.7 9.2 9.4 9.5 6.7P/CEPS 5.2 3.7 3.6 3.5 3.0

P/BV 0.6 0.5 0.5 0.5 0.5

Dividend yield (%) 0.8 1.1 1.1 1.1 1.1

EV/Net sales 0.6 0.6 0.6 0.6 0.5

EV/EBITDA 6.8 5.6 4.9 5.0 4.7

EV / Total Assets 0.7 0.8 0.7 0.7 0.7

Per Share Data (`)EPS (Basic) 7.9 19.6 19.1 19.1 26.9

EPS (fully diluted) 7.9 19.6 19.1 19.1 26.9

Cash EPS 34.6 49.3 50.4 51.9 61.0

DPS 1.5 2.0 2.0 2.0 2.0

Book Value 313.7 331.0 347.8 364.8 389.7

DuPont AnalysisEBIT margin 6.3 7.9 9.3 8.5 8.5

Tax retention ratio 0.8 0.7 0.8 0.7 0.7

Asset turnover (x) 1.3 1.4 1.4 1.4 1.5

ROIC (Post-tax) 6.3 7.4 10.4 8.5 8.9

Cost of Debt (Post Tax) 11.4 10.1 13.7 11.1 10.9

Leverage (x) 1.3 1.5 1.4 1.4 1.4

Operating ROE 0.0 3.3 5.9 4.9 6.3

Returns (%)ROCE (Pre-tax) 7.5 10.1 11.8 11.4 12.0

Angel ROIC (Pre-tax) 8.2 10.8 12.7 12.1 12.8

ROE 2.6 6.1 5.6 5.3 7.1

Turnover ratios (x)Asset TO (Gross Block) 3.3 3.3 3.1 3.2 3.4

Inventory / Net sales (days) 123 147 206 206 206

Receivables (days) 156 115 89 89 89

Payables (days) 119 135 174 165 165

WC cycle (ex-cash) (days) 225 183 181 173 173

Solvency ratios (x)Net debt to equity 1.3 1.5 1.4 1.4 1.4

Net debt to EBITDA 4.7 4.1 3.6 3.7 3.5

Int. Coverage (EBIT/ Int.) 0.9 1.1 1.2 1.2 1.3


12/12


M 14 2013 12

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement ITD Cementation

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

ITD Cementation 1Q CY 2013

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