ITD CEMENTATION, Strong inflows to aid growth
Call & Research Report by HDFC Securities
Sector: Construction – Infrastructure
CMP Rs. 107, Target Rs. 149 (39% upside potential)
Target Period: 12 Months
ITD Cementation (ITD) Q3FY23 revenue/EBITDA/APAT stood at INR 10.3/1/0.4bn, beating/(missing) our estimates by 12/2.5/(11.6)%. The miss is largely on account of higher raw material prices. With strong order bookings, ITD has guided for FY23 revenue of INR 49bn. Further, FY24/25 shall witness YoY revenue growth of 20/20% with high single-digit EBITDA margins. With an OI of INR 80bn in 9MFY23 (ex of INR 27bn L1), the OB, as of Dec’22, stood at INR 211.9bn (~4.3x FY23E revenue). The OB is well diversified, providing a natural hedge from a slowdown in any particular business segment. The net D/E as of Dec’22 stood at 0.42x vs. 0.29x at the end of Sep’22. We have recalibrated our estimates higher to factor in strong order booking. We reiterate BUY with an increased TP of INR 149/sh (10x Dec-24E EPS, rolled over).
● Financial highlights: ITD booked revenue of 10.3bn (+32.9/28.3% YoY/QoQ, a 12% beat). EBITDA came in at INR 1,040mn (+29.0/74.3% YoY/QoQ, a 2.5% beat). EBITDA margin: 7.8% (-24/+207bps YoY/QoQ, a tad below our estimate of 8.6%, owing to higher input and raw material prices and higher employee expenses). RPAT/APAT: INR 368mn (+87/86.2%, a 11.6% miss). With strong execution in Q3FY23 and likely INR 14bn of revenue for Q4FY23, ITD has guided for FY23 revenue at INR 49-50bn. FY24/25 shall witness YoY growth of 20/20% on the back of a strong opening order book and order inflows.
● Robust OB; revenue visibility over next 4+ years: With an OI of INR 80bn in 9MFY23, the OB, as of Dec’22, stood at INR 211.9bn (~4.3x FY23E revenue). In Q3FY23, ITD secured another order from the Adani Group to construct a container terminal at the port of Colombo in Sri Lanka worth INR 7.5bn. Client-wise, the OB is diversified among private/government/PSUs at 40/39/21%. Business-wise, the OB is diversified among urban infra/highways/marine/ industrials/dams and tunnels/wastewater/specialist engineering at 30.1/22.9/22.6/9.5/7.6/3.6/3.8%. Geographically, the OB is majorly diversified among Tamil Nadu/UP/Karnataka/West Bengal/Gujarat at 23.3/22.9/14.2/8.5/8.7%. ITD has a robust bid pipeline of INR 120bn.
● Comfortable balance sheet: ITD’s consolidated gross debt, as of Dec’22, stood at INR 6.4bn vs. INR 5.3bn, as of Sep’22. The net D/E, as of Dec’22, stood at 0.42x vs. 0.29x in Sep’22. ITD guided that FY23 debt will increase further due to the execution ramp-up in the Ganga Expressway project and planned Capex in the Chennai Metro project.
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