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Andheri
Airport
Santacruz
Bandra
Mahim
Matunga
Dadar
Prabhadevi
Dardeo
Churchgate
Colaba
Worli
PowaiJogeshwari (W)
CONSTRUCTION & INFRASTRUCTURE
Mumbai metro mission gains momentumSeptember 22, 2015
Nitin Arora Research [email protected] +91 22 66242491
Kushan ParikhResearch [email protected] +91 22 66121431 SECTOR UPDATE
Mumbai Metro Features
Gauge (Nominal) 1435mm
Route length (underground) 32.5 km
No of stations 26
Design speed 90 kmph
Max operating speed 80 kmph
Rolling stock Maximum Axle Load: 17 tonnes
Length of the cars: 21.9 metres
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. Emkay Global Financial Services Ltd.
©
Your success is our success
Emkay
India Equity Research | Construction & Infrastructure
September 22, 2015
Sector Update
Construction & Infrastructure
Mumbai metro mission gains momentum
Adani Ports BUY
CMP Target Price
333 385
Ahluwalia Contracts BUY
CMP Target Price
247 280
Ashoka Buildcon ACCUMULATE
CMP Target Price
164 195
Gujarat Pipavav REDUCE
CMP Target Price
178 176
IL&FS Transportation HOLD
CMP Target Price
95 160
IRB Infrastructure BUY
CMP Target Price
227 310
J Kumar BUY
CMP Target Price
760 800
Larsen & Toubro BUY
CMP Target Price
1,540 1,830
NCC ACCUMULATE
CMP Target Price
67 93
Sadbhav Engineering BUY
CMP Target Price
282 380
Simplex Infrastructure ACCUMULATE
CMP Target Price
293 434
Nitin Arora [email protected] +91 22 66242491
Kushan Parikh [email protected] +91 22 66242431
MMRC (Mumbai Metro Rail Corporation) is all set to award the seven civil construction
packages in the next one month. The total civil packages are estimated to cost around
Rs150-160 bn and each package comprises of 4-5 km long twin tunnel
Issues with respect to Car shed got addressed however package two (Kalbadevi,
Girgaon, Grant road) and four (Dadar area) can face agitation
Each package will be requiring two-three Tunnel boring machines with a condition of one
new TBM in every package, Bidders (barring J Kumar infra) likely to procure TBMs on
operational lease as project size require higher bank guarantees and capex
We believe companies with better financial positions like L&T (has bid for all seven
packages) , J Kumar Infra (has bid for five packages) are well placed to benefit
Mumbai Metro line–III project: Final awarding soon
Five months after the bid submission by the 9 prequalified bidders for the Mumbai metro
phase –III project (Colaba – Bandra –SEEPZ, 33.5 km), MMRC (Mumbai Metro Rail
Corporation) is all set to award the seven civil construction packages in the next one month.
The total civil packages are estimated to cost around Rs150-160 bn and each package
comprises of 4-5 km long twin tunnel. The work is expected to start in by January 2016 and
is targeted to be completed by 2019.
In May 2015 bids from eight consortiums have been received for the 7
packages
M/s. AFCONS Infrastructure Ltd./Kyivmetrobud,
M/s. Continental Engineering Corporation/ITD Cementation India Ltd/Tata Projects Ltd
M/s. DOGUS/SOMA, M/s.
J.Kumar Infraprojects Ltd/China Railway No.3 Engineering Group Co. Ltd,
M/s. Larsen & Toubro Ltd/Shanghai Tunnel Engineering Co. Ltd, M/s.
OSJC Moscow Metrostroy/Hindustan Construction Co. Ltd,
M/s. Pratibha Industries Ltd/Guandong Yuantian Engineering Co and
M/s. Unity Infraprojects Ltd/IVRCL Ltd/China Railway Tunnel Group Co. Ltd.
Financial Snapshot (Consolidated)
EPS EV/EBITDA P/E
(Rs mn) FY16E FY17E FY16E FY17E FY16E FY17E
Adani Ports 11.3 14.0 18.9 15.4 29.5 23.8
Ahluwalia Contracts 12.4 16.1 11.5 8.7 19.9 15.3
Ashoka Buildcon 4.2 6.2 11.0 9.3 39.4 26.3
Gujarat Pipavav 8.8 10.6 17.4 14.7 20.2 16.7
IL&FS Transportation 13.9 17.7 9.5 8.5 6.8 5.3
IRB Infrastructure 17.5 16.8 8.6 7.7 13.1 13.5
J Kumar 35.4 50.2 10.8 8.6 21.4 15.1
Larsen & Toubro 53.8 67.8 18.3 14.7 28.8 22.7
NCC 3.2 5.2 8.1 6.7 20.7 12.8
Sadbhav Engineering 8.4 10.8 15.7 12.5 15.0 16.0
Simplex Infrastructure 16.7 29.4 6.6 5.7 17.5 10.0
Source: Emkay Research Note: Sadbhav Engg. P/E ratio is FY16E/17E implied P/E as we have valued the company on
SoTP basis and estimate only standalone EPS.
Construction & Infrastructure India Equity Research | Sector Update
Emkay Research | September 22, 2015 2
Exhibit 1: Metro UG Packages
Package
Bidders 1 2 3 4 5 6 7
Total Bids
Placed
L&T - Shanghai Tunnel Engg 7
J. Kumar - China Railway No.3 Engg Grp 5
Continental Engg Corp - ITD Cem - Tata
Projects 5
OSJC Moscow Metrostroy - HCC 5
Pratibha Industries - Guandong Yuantian
Engg 3
Afcons Infra - Kyivmetrobud 2
Dogus - Soma 2
Unity Infra - IVRCL - China Railway
Tunnel Grp 1
Total Bidders for each Package 3 4 4 4 5 7 3 30
Source: MMRC, Emkay Research
Car shed issue got addressed
During the planning stage it was proposed that the car shed to park metro coaches will be built
on Aarey Colony land. However due to the protest/agitation MMRC shifted the location of the
depot from Aarey colony to Kanjurmarg.
The state government has moved to High court seeking that a two-decade old stay on 135.70
acres of land in Kanjurmarg be lifted for its Metro 3 project. While around 101 acres would be
used for the car shed, the remaining 34 acres would be used to set up a temporary pre-casting
yard.
Recently the Bombay high court asked the state if it was willing to deposit the compensation
account for over 100 acres of land in Kanjurmarg which it wants for the Metro III project.
The Kanjurmarg land has been under a legal dispute since 1953. The claimants had launched a
second round of litigation in 1996. In 1997, the HC had restrained the state government from
allotting land to the tune of around 400 acres in Kanjurmarg any person, following a legal dispute
over it that dates back to 1953.
The extension to Kanjurmarg from SEEPZ will be an 8km stretch which will be done on an
elevated basis. This will cost INR15‐17bn. MMRDA/state govt will fund the extension on its own
without taking help from JICA.
Package two (Kalbadevi, Girgaon, Grant road) and four (Dadar area) can face agitation
As per discussion with the awarding authority and industry experts, Package two which includes
four underground stations at CST, Kalbadevi, Girgaon, Grant Road and Package 4 which
includes three underground stations at Siddhi Vinayak, Dadar and Shitaladevi might face
agitation as it requires displacement of people.
Issues at Package 2
As per project plans, 26 buildings need to be demolished to make way for the proposed Girgaum
and Kalbadevi stations. Locals are opposed as more than 600 families and over 200 commercial
establishments will be affected.
Issues at Package 4
The MMRDA has issued notices to three buildings - Corner View apartment, Surve House and
Dayalji Apartment in Patilwadi of Dadar (W) near the Shivaji Park playground. All buildings are
over 75 years old.
Out of 200 square metres, 100 sq metres will be acquired permanently. Land is required for
ancillary work of the station and shaft for ventilation.
Construction & Infrastructure India Equity Research | Sector Update
Emkay Research | September 22, 2015 3
Requirement of Tunnel boring Machines
As per discussion with the awarding authority and industry experts, each package will be
requiring two- three Tunnel boring machines with a condition of one new TBM in every package
which implies requirement of minimum of 14 TBM’s and maximum of 21 TBMs in the metro
project.
We have seen contractors like L&T, ITD Cementation, J Kumar Infrastructure, Pratibha
Industries, have executed metro projects in Delhi where the underground strata is mostly a
combination of soil and rock whereas Mumbai will require different tunnel boring machines as
the city’s underground strata is very different. However you can modify the horse power of a
TBM but to a certain extent, which costs around Rs80-100 mn. The new TBM will cost around
Rs650 mn - 700 mn.
In Mumbai metro the underground stations will be constructed using other methods such as cut
and cover and the new Austrian tunneling method according to site requirements. The Austrian
tunneling method enables blasting the underground by drilling a small hole on the surface,
keeping it intact, and is useful for underground construction in congested areas.
Bidders (barring J Kumar infra) likely to procure TBMs on operational lease as project size require higher bank guarantees and capex
Given that complexity involved at the project level and on uncertainty on whether the same TBM’s
can get utilised which are currently under operation at Delhi metro project and requirement of
one new TBM in each package will lead to higher capex despite the 10% interest advance
payment from the awarding authority. We believe that the contractors will procure the TBM on
operational lease. Generally TBM;s in Indian market get purchased from Herrenknecht AG
(Germany), The Robins company etc and also from Chinese players (Pratibha industries owns
TBMs manufactured by Chinese players).
The Contractors have to submit performance guarantee of 10%, Advance payment guarantee of
10% and retention money guarantee of 5% which will imply Rs5 bn guarantee which the
company’s banker has to sanction for a project cost of Rs20 bn. This is assuming full guarantee
at the project level though it can be reduced depending on the stake each bidder has in the
consortium.
It is important to note 1% of the commission will be paid on bank guarantee on recurring basis
till the execution life of the project and margin money will have to be given, generally remains in
range of 5-7% of the guarantee amount which will remain blocked till the execution period.
Construction & Infrastructure India Equity Research | Sector Update
Emkay Research | September 22, 2015 4
Exhibit 2: Metro Financing
Particulars Value
Project cost (Rs mn) 25000
Contractor share 100%
Financing
Performance guarantee 10%
Advance payment guarantee 10%
Retention money guarantee 5%
Total guarantee to be given 25%
Total amount (Rs mn) 6250
Cash outflow by contractor on guarantee
Commission on total guarantee amount (to be paid till execution) 1%
Margin Money on total guarantee amount 5%
Commission (Rs mn) ( for 4 years) 250
Margin Money (Rs mn) 312.5
Total 562.5
Capex
Assuming one package
Scenario 1
Fresh purchase of TBM
Tunnel boring machine (For new machine) Rs600-650 mn per machine
Additional 2 TBM cost assuming modification Rs200-250 mn
Other capex Rs200 mn
Total cash outflow on capex Rs1000-1100 mn
Scenario 2
Operational lease for TBM
Rental cost for TBMs 10%
Rental Amount for 3 TBMs for 4 years 780
Other capex Rs200 mn
Total (Rs mn) 980
Working capital requirement Rs400-500 mn/year
Cash Inflows
Advance payment 10%
Total amount Rs mn 2500
Payment cycle from MMRC 30 days
Source: Emkay Research, Company
Construction & Infrastructure India Equity Research | Sector Update
Emkay Research | September 22, 2015 5
Muck issue: Import factor to be seen during the construction period
According to Environment Impact Assessment Report prepared by RITES , metro phase –III will
generate 54 lakh cubic metre of muck which will require 13.8 lakh square metre of land –an
average four meters deep.
The report suggests that the muck may be used:
For reclamation in the coastal road project
To be transported to quarries in Thane and Raigad districts about 100 km from the city.
The report however points out that entrance roads to a number of these quarries do not
exist and states the 54 lakh cubic metres of muck will have to be transported by trucks to
the nearest proposed jetty.
Truck movement required for transporting the muck/earth will be about 591 truck trips per
day for the entire length. On an average a truck is anticipated to travel about 50km per trip.
Hence, the total distance travelled will be 29,550km per day.
Deep-sea dumping, 100 km from Mumbai's coast, or dumping into the Rohini creek at
Shrivardhan village on the Raigad coast. However we have seen use of dredged sand for
reclamation purposes as alien soil used for reclamation can destroy marine ecology.
Construction & Infrastructure India Equity Research | Sector Update
Emkay Research | September 22, 2015 6
How the authority will decide on which basis the packages are to be awarded?
The authority will be awarding no more than 2 packages to a single consortium. We are assuming
a scenario where L&T is L1 in more than 2 packages (packages 3, 5 & 6) and evaluating how it
will award these packages.
Exhibit 3: Assuming L&T is L1 in packages 3, 5 & 6
Package
Bidders 1 2 3 4 5 6 7
L&T - Shanghai Tunnel Engg L1 L1 L1
J. Kumar - China Railway No.3 Engg Grp
Continental Engg Corp - ITD Cem - Tata Projects
OSJC Moscow Metrostroy - HCC
Pratibha Industries - Guandong Yuantian Engg
Afcons Infra - Kyivmetrobud
Dogus - Soma
Unity Infra - IVRCL - China Railway Tunnel Grp
Source: Company, Emkay Research
Exhibit 4: Assumptions of package sizes and L1 and L2 bids
Particulars (in Rs bn)
Package
size L1 Bid L2 Bid L1-L2 Gap % Gap
Lowest TPC
of L1-L2
combined
Package 3 15.00 15.50 16.50 1.00 6.5% 16.50
Package 5 25.00 26.00 28.00 2.00 7.7% 26.00
Package 6 20.00 20.50 21.75 1.25 6.1% 20.50
Total 60.00 62.00 66.25 63.00
Source: Company, Emkay Research
Case 1 - Lowest TPC (Total project cost)
In case the Authority intends to award 2 out of the 3 packages, that L&T is L1 in, to L&T and the
remaining package to the L2 bidder at their respective bid costs, then we believe the Authority
will look to award the packages in such a way that the Total Project Cost (TPC) comes out
to be lowest, which in our case would mean awarding Package 3 to the L2 bidder, and awarding
Packages 5 & 6 to L&T (L1) in order to get the lowest possible TPC of Rs63 bn at respective
bids for the combination of these 3 packages.
Case 2 - Lowest % Gap between L1 & L2 bids
In case the Authority intends to award 2 out of the 3 packages, that L&T is L1 in, to L&T at its
bid cost and the remaining package to the L2 bidder at the bid cost of L1 (L&T), then we believe
that the Authority might look at the lowest percentage gap between the L1 & L2 bids, and
award the packages in such a way that the L2 bidder with the lowest percentage gap will
be awarded that package at the bid cost of L1 and the remaining 2 packages will go to the
L1 bidder (L&T). In our case that would mean L&T (L1) would be awarded packages 3 & 5 while
the L2 in package 6 will be awarded that package at the L1 bidder's cost. The logic behind lowest
percentage gap being that the L2 with lowest percentage gap will find it easiest to match the L1's
bid cost.
Moreover it will be interesting to see if the awarding Authority can also look at awarding 2
packages in a contiguous stretch to the L1 bidder and the remaining package to the L2 bidder in
order to reduce execution risk and bring in efficiencies.
Construction & Infrastructure India Equity Research | Sector Update
Emkay Research | September 22, 2015 7
Description of the Works
The Mumbai Metro Rail Corporation Limited (MMRC) hereafter “The Employer” intends to pre-
qualify agencies for the following contracts under this project:
1.1 Contract Package MM3-CBS-UGC-01
Ch. : -488 to Ch. : 3762 including four underground stations at Cuffe Parade, Vidhan Bhavan,
Churchgate and Hutatma Chowk and associated bored tunnels together with two tunnel sidings
at Cuffe Parade.
Locations of Stations are:
Cuffe Parade Station: BMC Park (Taj Vivanta)
Vidhan Bhavan Station : In between Nariman Point Fire Brigade Station and
Vidhan Sabha Assembly Hall (Vidhan Bhavan Assembly)
Churchgate Station: Jamshedji Tata Road ( Eros Cinema Hall)
Hutatama Chowk Station: Dadabhai Naoroji Road (Hutatma Statue)
1.2 Contract Package MM3-CBS-UGC-02
Ch.: 3762 to Ch.: 7811 including four underground stations at CST, Kalbadevi, Girgaon and
Grant Road and associated bored tunnels.
Locations of stations are:
CST Metro Station: Azad Maidan close to Mahapalika Marg (CST Railway Station)
Kalbadevi Station: Jagannath Shankar Sheth Road (Parsi Temple)
Girgaon Station: Jagannath Shankar Sheth Road (Maratha Mandir High School)
Grant Road Station: Dadabhai Bhadkamkar Road (B. Ed. College, Gilger Tank Building)
1.3 Contract Package MM3-CBS-UGC-03
Ch.: 7811 to Ch.: 12868 including five underground stations at Mumbai Central, Mahalakshami,
Science Museum, Acharya Atre Chowk and Worli and associated bored tunnels.
Locations of stations are:
Mumbai Central Metro Station: Dr. Nair Marg (Mumbai Central Railway Station)
Mahalakshami Metro Station: Sane Guruji Road (Jacob Circle)
Science Museum Station: Dr. E Moses Road (Race Course)
Acharya Atre Chowk Station: Dr. E Moses Road (B.M.C. Office)
Worli Station: Dr. Annie Besant Road (Glaxo SmithKline Building)
1.4 Contract Package MM3-CBS-UGC-04
Ch.: 12868 to Ch.: 18976 including three underground stations at Siddhi Vinayak, Dadar and
Shitaladevi and associated bored tunnels.
Locations of stations are:
Siddhi Vinayak Station: BMC Ground (Siddhi Vinayak Temple)
Dadar Station: Namdar Gopalkrushna Gokhale Road (Shiv Sena Bhavan )
Shitaladevi Station: Lady Jamshedji Marg (Paradise Cinema)
1.5 Contract Package MM3-CBS-UGC-05
Ch.: 18976 to Ch.: 23900 including four underground stations at Dharavi, B.K.C. Vidya Nagari
and Santa Cruz and associated bored tunnels together with two tunnel sidings at B.K.C.
Locations of stations are:
Dharavi Station: Mahim Sion Link Road (Dharavi Hutment)
B.K.C Station: B.K.C. Road (Income Tax Office)
Vidyanagri Station:B.K.C. - F Block Road (Uttar Bharat Education Institute)
Santa Cruz Station Western Express Highway (Wakola Flyover)
Construction & Infrastructure India Equity Research | Sector Update
Emkay Research | September 22, 2015 8
1.6 Contract Package MM3-CBS-UGC-06
Ch.: 23900 to Ch.: 28388) including three underground stations at CSIA Domestic Airport,
Sahar Road and CSIA International Airport and associated bored tunnels.
Locations of stations are:
CSIA Domestic Airport Station: CSIA Domestic Airport
Sahar Road Station: Sahar Road (International Airport)
CSIA International Airport Station: International Airport
1.7 Contract Package MM3-CBS-UGC-07
Ch.: 28388 to Ch.: 32367 including three underground stations at Marol Naka MIDC and
SEEPZ and associated bored tunnels together with a ramp for the depot connection.
Locations of stations are:
Marol Naka Station: Andheri – Kurla Road ( MML1 Marol Naka Station)
MIDC Station: Road No.7 – connecting Krantiveer Akhuji Salve Road(Sr. Police
Colony & Vikroli Village Hutment Area)
SEEPZ Station: Krantiveer Akhuji Salve Marg (SEEPZ Gate No. 1)
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. Emkay Global Financial Services Ltd.
©
Your success is our success
Emkay
India Equity Research | Construction & Infrastructure
September 22, 2015
Company Update
J Kumar
Well placed
CMP Target Price
Rs760 Rs800 ()
Rating Upside
BUY () 5.3 %
Change in Estimates
EPS Chg FY16E/FY17E (%) NA
Target Price change (%) NA
Previous Reco BUY
Emkay vs Consensus
EPS Estimates
FY16E FY17E
Emkay 35.4 50.2
Consensus 38.6 54.2
Mean Consensus TP Rs 840
Stock Details
Bloomberg Code JKIL IN
Face Value (Rs) 10
Shares outstanding (mn) 32
52 Week H/L 848 / 299
M Cap (Rs bn/USD bn) 24 / 0.37
Daily Avg Volume (nos.) 20,389
Daily Avg Turnover (US$ mn) 0.2
Shareholding Pattern Jun '15
Promoters 51.0%
FIIs 21.7%
DIIs 10.4%
Public and Others 16.9%
Price Performance
(%) 1M 3M 6M 12M
Absolute (2) 28 17 131
Rel. to Nifty - 35 26 140
Relative price chart
Source: Bloomberg Nitin Arora
+91 22 66242491
Kushan Parikh
+91 22 66242431
Kushan Parikh
+91 22 66242431
-10
24
58
92
126
160
300
410
520
630
740
850
Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15
%Rs
J Kumar Infra (LHS) Rel to Nifty (RHS)
Bid for 5 out of 7 packages for Mumbai metro phase –III project, each package requires
3 TBM (Tunnel boring machines) in which one has to be new, the company did not rule
out the possibility of winning 2 packages worth Rs55-60bn
According to our calculation if Jkumar infrastructure wins 2 packages will require bank
guarantees worth Rs10 bn and capex worth Rs1.7 bn, we currently build in one package
from Mumbai metro phase –III project in our estimates
Given the order intake visibility remains strong specially from the metro projects (capital
intensive and requires higher guarantees) and road sector which will increase the future
working capital requirements and capex going forward, the company in our view can look
at raising funds again rather than stretching the balance sheet
We do see upgrade to our FY17E earnings if the company wins two packages of Mumbai
metro phase –III project. We will review our FY17 earnings post the event and any
correction seen in the stock price will be an opportunity to buy
Bid for 5 out of 7 packages for Mumbai metro phase –III project.
For the Mumbai metro project phase –III the company has bid for 5 packages out of total 7
packages. Each package is expected to vary between Rs22-25 bn and, some packages
estimated to cost Rs30 bn (A single company can take/win maximum 2 packages).
Project involves higher bank guarantee and capex
Given that each package requires 3 TBM (Tunnel boring machines) in which companies have
to purchase one new TBM. The company did not rule out the possibility of winning 2 packages
worth Rs55-60bn. The company can modify (to increase the horse power) two of his existing
TBM’s which will make it suitable to work for Mumbai packages. The total cost to be spent on
modification stands at Rs80-100mn per machine.
The 4 tunnel boring machines which are currently getting utilised in Delhi metro, each TBM
will get free from the Delhi project from January 2016 to April 2016. The total capex is
estimated around Rs1.7 bn if the company is able bag two packages of Mumbai metro.
Given that company has always believed that in the long term, leased equipment’s are cost
ineffective, and therefore, ownership and use of modern construction equipment results in
cost savings we believe that company will not procure TBMs on operational lease basis.
According to our calculation if Jkumar infrastructure wins 2 packages will require bank
guarantees worth Rs10 bn against which cash outflow will be towards the commission (Rs100
mn every year) which needs to get paid every year till the execution period and Margin money
(Rs400 mn ) which will remain blocked till the end of the execution period.
Financial Snapshot (Standalone)
(Rs mn) FY16 FY17 FY15 FY16E FY17E
Net Sales 9,773 11,686 13,181 16,052 20,646
EBITDA 1,440 1,876 2,254 2,668 3,415
EBITDA Margin (%) 14.7 16.1 17.1 16.6 16.5
APAT 758 841 944 1,142 1,618
EPS (Rs) 27.3 30.2 29.3 35.4 50.2
EPS (% chg) 11.3 11.0 (3.2) 21.0 41.7
ROE (%) 16.1 15.6 13.8 13.6 16.9
P/E (x) 27.9 25.1 25.9 21.4 15.1
EV/EBITDA (x) 15.5 13.6 12.5 10.8 8.6
P/BV (x) 4.2 3.7 3.1 2.8 2.4
Source: Company, Emkay Research
J Kumar (JKIL IN) India Equity Research | Company Update
Emkay Research | September 21, 2015 10
Given the strong order intake visibility, Company might not look to stretch balance sheet, can explore for raising funds again
Apart from Mumbai Metro Line –III project, order intake visibility remains strong from projects like
DMRC (Noida Metro – Rs20 bn, Delhi Metro Phase IV-Rs100 bn plus) and Mumbai Metro,
Ahmedabad Metro – Rs60 bn (It has won one package of elevated station at Ahmedabad metro
project worth Rs2.78 bn) ) and Nagpur Metro Rs85 bn.
Apart from metro sector the company has also bid for Rs50 bn worth road projects floated by the
Mumbai Municipal Corporation and Rs20 bn worth JNPT NHAI road projects (4 packages). It
has won one package of Rs 5 bn of JNPT NHAI road project, which was won at par with the
NHAI benchmark cost by the company in JV with JM Mhatre infra, the company’s share stands
at Rs3.28 bn.
The company is also eyeing the ambitious Mumbai Coastal Road project worth Rs100 bn which
is expected to come up in 3 phases, the company expects package sizes of Rs5-10 bn on EPC
mode. The project is expected to come up for tendering in 6 months.
The current fund and Non fund based limit stands at Rs5bn (currently Cash Credit (CC) limit
utilised upto Rs3.65 bn) and Rs10 bn (non-fund limit can increase further) for the company.
However the company has strong balance sheet with debt equity ratio of 0.65x but given
the order intake visibility remains strong specially from the metro projects (capital
intensive and requires higher guarantees) and road sector which will increase the future
working capital requirements and capex going forward, in our view the company can look
at raising funds again rather than stretching the balance sheet.
Exhibit 5: Revenue (Rs bn)
Source: Company, Emkay Research
Exhibit 6: EBITDA (Rs bn)
Source: Company, Emkay Research
Exhibit 7: EBITDA Margin
Source: Company, Emkay Research
Exhibit 8: EPS
Source: Company, Emkay Research
9.03 9.7711.69
13.18
16.05
20.65
0.00
5.00
10.00
15.00
20.00
25.00
FY
12
FY
13
FY
14
FY
15
FY
16E
FY
17E
1.211.44
1.882.25
2.67
3.41
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
FY
12
FY
13
FY
14
FY
15
FY
16E
FY
17E
13.4%14.7%
16.1%17.1%
16.6% 16.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
FY
12
FY
13
FY
14
FY
15
FY
16E
FY
17E
2427
30 2935
50
0.00
10.00
20.00
30.00
40.00
50.00
60.00
FY
12
FY
13
FY
14
FY
15
FY
16E
FY
17E
J Kumar (JKIL IN) India Equity Research | Company Update
Emkay Research | September 21, 2015 11
Exhibit 9: Debt (Rs bn)
Source: Company, Emkay Research
Exhibit 10: Debt/Equity
Source: Company, Emkay Research
Exhibit 11: Mumbai metro Phase -III project - Financing
Mumbai metro Phase -III project
Tunnel boring machine required
Minimum 4
Maximum 6
Assuming 2 packages -Capex
Fresh purchase of 2TBMs 1300
Additional 2 TBM cost assuming modification 200
Other capex 200
Total capex 1700
Guarantees to be given (assuming 2 packages)
Project cost 55000
J Kumar share in Consortium 74%
Financing
Performance guarantee 10%
Advance payment guarantee 10%
Retention money guarantee 5%
Total guarantee to be given 25%
Total amount Rsmn 10175
Cash outflow on guarantees given
Commission on total guarantee amount (to be paid till execution) 1%
Margin Money on total guarantee amount 5%
Commission Rsmn ( for 4 years) 407
Margin Money Rsmn (Amount gets blocked for 5 years) 509
Total 916
Source: Company, Emkay Research
1.712.36
5.565.15
5.505.95
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00F
Y12
FY
13
FY
14
FY
15
FY
16E
FY
17E
0.13
0.25
0.58
0.55
0.42
0.42
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
FY
12
FY
13
FY
14
FY
15
FY
16E
FY
17E
J Kumar (JKIL IN) India Equity Research | Company Update
Emkay Research | September 21, 2015 12
Key Financials (Standalone)
Income Statement
Y/E Mar (Rs mn) FY16 FY17 FY15 FY16E FY17E
Net Sales 9,773 11,686 13,181 16,052 20,646
Expenditure 8,333 9,810 10,926 13,385 17,231
EBITDA 1,440 1,876 2,254 2,668 3,415
Depreciation 244 348 474 573 597
EBIT 1,196 1,529 1,781 2,095 2,817
Other Income 322 291 382 382 382
Interest expenses 406 576 768 772 802
PBT 1,112 1,243 1,395 1,704 2,397
Tax 354 402 451 562 779
Extraordinary Items 0 0 0 0 0
Minority Int./Income from Assoc. 0 0 0 0 0
Reported Net Income 758 841 944 1,142 1,618
Adjusted PAT 758 841 944 1,142 1,618
Balance Sheet
Y/E Mar (Rs mn) FY16 FY17 FY15 FY16E FY17E
Equity share capital 278 278 322 322 322
Reserves & surplus 4,756 5,475 7,569 8,550 9,942
Net worth 5,034 5,753 7,891 8,873 10,264
Minority Interest 0 0 0 0 0
Loan Funds 2,363 5,559 5,154 5,503 5,953
Net deferred tax liability 51 71 131 71 71
Total Liabilities 7,449 11,382 13,176 14,446 16,288
Net block 2,089 3,255 4,301 4,378 4,130
Investment 1 23 11 11 11
Current Assets 8,472 11,500 11,978 13,844 17,368
Cash & bank balance 1,119 1,212 1,548 1,266 1,191
Other Current Assets 284 1,890 2,193 2,639 3,507
Current liabilities & Provision 4,134 5,148 3,746 4,420 5,854
Net current assets 4,338 6,352 8,232 9,424 11,513
Misc. exp 9 0 0 0 0
Total Assets 7,449 11,382 13,176 14,446 16,288
Cash Flow
Y/E Mar (Rs mn) FY16 FY17 FY15 FY16E FY17E
PBT (Ex-Other income) (NI+Dep) 790 952 1,013 1,322 2,015
Other Non-Cash items (63) 73 3 0 0
Chg in working cap 7 (2,000) (1,559) (1,475) (2,165)
Operating Cashflow 1,030 (453) 311 631 471
Capital expenditure (1,280) (2,254) (428) (650) (350)
Free Cash Flow (250) (2,706) (117) (19) 121
Investments 83 (128) (107) 0 0
Other Investing Cash Flow 0 0 0 0 0
Investing Cashflow 405 163 275 382 382
Equity Capital Raised 0 0 1,372 0 0
Loans Taken / (Repaid) 385 3,205 (433) 348 450
Dividend paid (incl tax) (73) (113) (141) (160) (226)
Other Financing Cash Flow (82) (90) (107) 0 0
Financing Cashflow (175) 2,426 (77) (584) (578)
Net chg in cash (20) (118) 81 (221) (76)
Opening cash position 1,139 1,119 1,212 1,548 1,266
Closing cash position 1,119 1,001 1,293 1,327 1,190
J Kumar (JKIL IN) India Equity Research | Company Update
Emkay Research | September 21, 2015 13
Key Ratios
Profitability (%) FY16 FY17 FY15 FY16E FY17E
EBITDA Margin 14.7 16.1 17.1 16.6 16.5
EBIT Margin 12.2 13.1 13.5 13.0 13.6
Effective Tax Rate 31.9 32.3 32.3 33.0 32.5
Net Margin 7.8 7.2 7.2 7.1 7.8
ROCE 22.4 19.3 17.6 17.9 20.8
ROE 16.1 15.6 13.8 13.6 16.9
RoIC 284.5 88.1 56.2 56.6 30.6
Per Share Data (Rs) FY16 FY17 FY15 FY16E FY17E
EPS 27.3 30.2 29.3 35.4 50.2
CEPS 36.0 42.8 44.0 53.2 68.7
BVPS 180.8 206.9 244.9 275.3 318.5
DPS 0.0 0.0 0.0 0.0 0.0
Valuations (x) FY16 FY17 FY15 FY16E FY17E
PER 27.9 25.1 25.9 21.4 15.1
P/CEPS 20.9 17.6 17.1 14.2 11.0
P/BV 4.2 3.7 3.1 2.8 2.4
EV / Sales 2.3 2.2 2.1 1.8 1.4
EV / EBITDA 15.5 13.6 12.5 10.8 8.6
Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0
Gearing Ratio (x) FY16 FY17 FY15 FY16E FY17E
Net Debt/ Equity 0.2 0.8 0.5 0.5 0.5
Net Debt/EBIDTA 0.9 2.3 1.6 1.6 1.4
Working Cap Cycle (days) 120.2 160.5 185.1 185.5 182.5
Growth (%) FY16 FY17 FY15 FY16E FY17E
Revenue 8.3 19.6 12.8 21.8 28.6
EBITDA 18.9 30.3 20.2 18.3 28.0
EBIT 17.0 27.8 16.5 17.6 34.5
PAT 11.3 11.0 12.2 21.0 41.7
Quarterly (Rs mn) Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16
Revenue 3,330 2,955 2,967 3,934 3,546
EBITDA 571 576 530 583 584
EBITDA Margin (%) 17.1 19.5 17.8 14.8 16.5
PAT 229 203 239 273 259
EPS (Rs) 8.2 6.3 7.4 8.5 8.0
Shareholding Pattern (%) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Promoters 59.2 51.0 51.0 51.0 51.0
FIIs 10.2 17.9 19.5 21.0 21.7
DIIs 4.6 10.4 10.1 10.3 10.4
Public and Others 26.1 20.7 19.4 17.7 16.9
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. Emkay Global Financial Services Ltd.
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Emkay
India Equity Research | Construction & Infrastructure
September 22, 2015
Management Meet Update
ITD Cementation India Ltd.
Margins to improve from CY16
CMP
Rs80
Rating
NOT RATED
Change in Estimates
EPS Chg CY15E/CY16E (%) NA
Target Price change (%) NA
Previous Reco NA
Emkay vs Consensus
EPS Estimates
CY15E CY16E
Emkay - -
Consensus 2.5 6.0
Mean Consensus TP Rs 109
Stock Details
Bloomberg Code ITCE IN
Face Value (Rs) 1
Shares outstanding (mn) 155
52 Week H/L 90 / 39
M Cap (Rs bn/USD bn) 12 / 0.19
Daily Avg Volume (nos.) 47,091
Daily Avg Turnover (US$ mn) 0.1
Shareholding Pattern Jun '15
Promoters 51.6%
FIIs 3.5%
DIIs 23.9%
Public and Others 20.9%
Price Performance
(%) 1M 3M 6M 12M
Absolute (1) 29 13 86
Rel. to Nifty (2) 33 24 90
Relative price chart
Source: Bloomberg Nitin Arora
+91 22 66242491
Kushan Parikh
+91 22 66242431
-20
20
60
100
140
180
100
185
270
355
440
525
Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14
%Rs
ITD Cementation (LHS) Rel to Nifty (RHS)
Meeting highlights
Expects significant increase in the order inflow, currently L1 in orders worth Rs20.4 bn
where ITD Cementation’s share will be Rs14.4 bn. In CY15 the management has
targeted order inflow of Rs50 bn plus including one package of Mumbai metro phase –III
project
The Management however did not rule out the possibility of winning two packages in the
Mumbai metro phase –III project. The company has bid for the Mumbai Metro Phase III
project in consortium where its share stands at 40%. The company is looking to obtain
the TBMs (Tunnel boring machine) on an operational lease and not on the books of the
company itself
Given that 10% of the order books are low margin which will get executed by Q2CY16
and with newer order wins are margin accretive, management expects that EBITDA
margins to rebound to 7%/9% in CY15E/16E.Guides for revenue worth Rs27 bn/Rs35
bn/Rs40 bn in CY15E/16E/17E
Expect order intake momentum to continue
The company has achieved order inflow of Rs26 bn as of YTDCY15 (including Water projects
in Kolkata and Baroda worth Rs2.5 bn total, Piling worth Rs500 mn, Marine Jobs from Adani
worth Rs1.33 bn and order from PSA (Port of Singapore) at JNPT worth Rs21.6 bn) .
The company is currently L1 in orders worth Rs20.4 bn where ITD Cementation’s share will be
Rs14.4 bn.
Rs18 bn order comprises of Establishment of Captive Coal Jetty with unloading facilities
and Pipe Conveyor for 2 x 660 MW Udangudi Supercritical Thermal Power Project at
Udangudi, Thoothukudi Distt., Tamilnadu.
Rs2.43 bn order of development of West Quay - North berth in the inner harbor of
Vishakhapatnam Port
The company also expects orders worth-
Rs2.82 bn as an additional scope from port of Singapore at JNPT port.
Piling order of Rs10 bn in Nigeria.
One package of Rs25-30 bn in Mumbai Metro phase -3 (Prequalified for 2 packages). The
company however did not rule out the possibility of winning two packages in the Mumbai
metro phase –III project. The company has bid for the Mumbai Metro Phase III project in
consortium where its share stands at 40%. The company is looking to obtain the TBMs
(Tunnel boring machine) on an operational lease and not on the books of the company itself.
Financial Snapshot (Consolidated)
(Rs mn) FY16 FY17 CY13 CY14 1HCY15
Net Sales 16,976 16,509 15,841 17,189 13,201
EBITDA 1,668 1,912 1,625 911 830
EBITDA Margin (%) 9.7 11.6 10.3 5.3 6.3
APAT 226 220 93 (761.2) 305
EPS (Rs) 19.6 19.1 8.1 (49.0) 2.0
EPS (% chg) 140.7 (2.7) (57.7) (707.5) -
ROE (%) 6.1 5.6 2.3 4.0 -
P/E (x) 40.9 42.5 100.4 64.0 -
EV/EBITDA (x) 10.1 9.2 8.7 10.2 -
P/BV (x) 2.6 2.4 2.3 2.3 -
Source: Company, Emkay Research Note: Per share data for 1HCY15 reflects the stock split from FV of Rs10 per share to Rs1 per share.
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 15
Major recently awarded projects included in order book are:
Dredging and reclamation works for development of 4th container terminal in Jawaharlal
Nehru Port (JNP)-phase-1 worth 21,681 mn from Bharat Mumbai Container Terminals Pvt.
Ltd.
Engineering, Procurement & Construction (EPC) contract for Container Terminal 5 at
Mundra from Adani Port & Special Economic Zone Ltd. Worth 1327 mn.
Providing and Laying 1400mm dia. / 1800mm dia. RCC NP4 class Drainage Gravity line by
Micro-Tunnelling Method from Vadodara Mahanagar Seva Sadan worth 1,211 mn.
Piling Works of 15000 Nos. Piles by Rotary Rigs For 5-10 MTPA Expansion Project at M/s.
JSW Steel Plant at Dolvi, Pen worth 516 mn.
Designing, Providing, Constructing, Erecting, Testing & Commissioning of Intake Channel,
Jackwell & Pump House for Bhama Askhed Water Supply Scheme, Pune worth 447 mn.
Construction of Bose Institute at Salt Lake, Kolkata worth 1,334 mn from Rites Ltd.
Construction of Elevated road at Noida worth 4,155 mn from Noida.
Construction of IIT Ropar worth 2,732 mn from CPWD Ropar.
Rehabilitation and Refurbishment of Water Works at Palta and Garden Reach worth 806
mn from KEIIP.
Design and Construction of reclamation and container yard at JNPT worth 4,067 mn from
Nhava Sheva (I) Gateway Terminal. Construction of LNG storage tanks at Mundra worth
1,113 mn from IHI Corporation.
Exhibit 12: Segmental Order Book breakup as of June 30, 2015
Source: Company, Emkay Research
51%
15%
11%
11%
2%4% 0%
6% Maritime Strucutures
Hydro/ Dams/ Tunnels/ Irrigation
Urban Infra Projects/ MRTS
Highways Bridges & Flyovers/Transportation
Industrial Civil Works
Specialist Eng Works
Other - Airports & Waste Water
Buildings
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 16
Exhibit 13: Major Tender Prospects
Segments
Value
(Rs mn) Projects
Project Value
(Rs mn)
Marine 32002 Establishment of Captive Coal Jetty with unloading facilities and Pipe Conveyor for 2 x 660 MW
Udangudi Supercritical Thermal Power Project at Udangudi, Thoothukudi Distt., Tamilnadu 25000
Engineering, Procurement & Construction (EPC) Contract for Bulk Berth 3A & 4 & Approach at
Dhamra, Orissa for Dharma Port Co. Ltd. 2000
Contract for Marine facilities of M/s Indian Oil Corporation Ltd. at Ennore Port in the State of Tamil
Nadu 2700
Development of West Quay - North (WQ-7 & WQ-8) berth in the inner harbor of Vishakhapatnam
Port (for left over works) 2302
Urban Infrastructure/MRTS 43891 Detailed Design and Construction of Underground Stations and Associated Tunnels: MM3-CBS-
UGC-04 (Submitted as CEC-ITD-TPL J.V. (40:40:20) from Mumbai Metro Rail Corp. Ltd 40000
Navi Mumbai Metro Trackworks (Installation only) for CIDCO 500
Civil work for bridges, Tunneling work, Excavation, Backfilling, & all civil works of Railway Line
Packages from RattanIndia Nasik Power Limited 2500
Construction of CC Block pavement , PQC pavement , Construction of Drain and development of
approach road from State Highway to MMLH complex at Ahmedgarh Near Ludhiana, Punjab from
Container Corporation of India Ltd.
891
Hydro/Dams/Tunnel/Irrigation 300 Rehabilitation of 150 MW Bhira Rehabilitation of Old Tunnel Project from Tata Power 300
Buildings 8327 Development of Phase 1 Campus including Buildings for IIM Raipur at Naya Raipur 2965
Construction of Married Accomodation, Medical Centre, Shopping Complex, Sports Complex,
Club Building, ESS, Residential Type A, B & C of NIT Meghalaya at Cherrapunji (Meghalaya) 975
Construction Of New Civil Works At Visvesvaraya National Institute Of Technology At Nagpur,
Maharashtra 1787
Construction of Metro Train Depot cum Workshop at Gyaspur on North South Corridor of
Ahmedabad Metro Rail Project Phase 1300
Construction of Hospital Building and ancillaries at Bengdubi in Darjeeling district of West Bengal 1300
Specialist Projects 18657 Various -
Source: Company, Emkay Research
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 17
Exhibit 1: Revenue CAGR of 4.4% over CY10-14
Source: Company, Emkay Research
Exhibit 2: EBITDA CAGR of -10.2% over CY10-14
Source: Company, Emkay Research
Exhibit 3: Reported PAT
Source: Company, Emkay Research
Exhibit 4: EPS
Source: Company, Emkay Research
Exhibit 5: Order Book CAGR of 6.8% over CY10-14
Source: Company, Emkay Research
Exhibit 6: Order Inflow CAGR of 4% over CY10-14
Source: Company, Emkay Research
14469
16976 16509 1584117189
13201
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
CY10 CY11 CY12 CY13 CY14 1HCY15
1404
1668
1912
1625
911 830
0
500
1000
1500
2000
2500
CY10 CY11 CY12 CY13 CY14 1HCY15
94
226 220
93
-761
-935-1000
-800
-600
-400
-200
0
200
400
CY10 CY11 CY12 CY13 CY14 1HCY15
8.1
19.6 19.1
8.1
-49.0
-6.0
-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
CY10 CY11 CY12 CY13 CY14 1HCY15
35366
29070 28911
38210
46011
64714
0
10000
20000
30000
40000
50000
60000
70000
CY10 CY11 CY12 CY13 CY14 1HCY15
21347
10826
16350
25140 24990 26000
0
5000
10000
15000
20000
25000
30000
CY10 CY11 CY12 CY13 CY14 1HCY15
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 18
Exhibit 7: EBITDA Margins averaged 9.3% over last 5 years
Source: Company, Emkay Research
Exhibit 8: Non Cash NWC as a % of sales
Source: Company, Emkay Research
Exhibit 9: Debt levels kept rising on working capital requirements
Source: Company, Emkay Research
Exhibit 10: Debt equity brought under control
Source: Company, Emkay Research
Exhibit 11: ROEs averaged 4.1% over last 5 years
Source: Company, Emkay Research
Exhibit 12: ROCEs averaged 10.1% over last 5 years
Source: Company, Emkay Research
9.7% 9.8%
11.6%
10.3%
5.3%6.3%
0%
2%
4%
6%
8%
10%
12%
14%
CY10 CY11 CY12 CY13 CY14 1HCY15
44% 43%
54%56% 55%
26%
0%
10%
20%
30%
40%
50%
60%
CY10 CY11 CY12 CY13 CY14 1HCY15
5468
6509
7834 7695 7653
6720
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
CY10 CY11 CY12 CY13 CY14 1HCY15
1.51.7
2.0 1.9
1.3 1.4
0.0
0.5
1.0
1.5
2.0
2.5
CY10 CY11 CY12 CY13 CY14 1HCY15
2.6%
6.1%5.5%
2.3%
4.0%
0%
1%
2%
3%
4%
5%
6%
7%
CY10 CY11 CY12 CY13 CY14
11.2%
12.9% 12.7%
10.0%
3.9%
0%
2%
4%
6%
8%
10%
12%
14%
CY10 CY11 CY12 CY13 CY14
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 19
10% of the order book are slow moving, newly won orders are margin accretive
Given that 10% of the order book remains slow-moving/low margin and further write offs are
expected in some orders which will get executed by Q2CY16 and with newer order wins remains
accretive, management expects that EBITDA margins to rebound to 7%/9% in CY15E/16E.The
management also stated that it is confident of achieving 10% plus margins in CY17E.
Given the accretion in the order book and visibility of new order intake remains strong,
management expects to clock revenue of Rs27 bn/Rs35 bn/Rs40 bn in CY15E/16E/17E. The
JNPT port PSA project contributed Rs2.12 bn to the revenue in Q2CY15 and is expected to
continue to contribute 30-40% to the revenue over the next 2 quarters in CY15E.
Focus on balance sheet improvement to continue
The company’s execution run rate slowed down from CY12 onwards due to disputed/ pending
claims in one of the road projects awarded by the NHAI and irrigation projects in Andhra Pradesh
amounting Rs3.5 bn which led to increase in the working capital.
In Q1CY15 the company has received lump sum payment from NHAI of Rs1.83 bn and has
taken write off worth Rs1.23 bn. With regards to pending claims amounting to Rs1 bn tied up
with the Andhra Pradesh government for 2 irrigation projects, the company has filed a case in
court and is also pursuing out of court negotiations with the authorities to settle the claims. The
initial indications are positive and if both parties settle on a number agreeable to both then the
matter could conclude by year end.
The company sees debt staying stable at the current levels for the rest of the year, while it does
not expect debt to grow further; it also does not envisage any repayment this year as operating
cash flows are not yet strong enough to support debt repayment. Consolidated debt was at
Rs6.72 bn as of June2015 versus Rs7.65 bn at end of March 2015. Standalone debt stands at
Rs5.70 bn as of Jun2015 versus Rs6.71 bn at end of March2015. The interest cost for the
company as of now stands at 12.1% down from 13.2% in CY14. The company expects average
borrowing costs to come down further in CY16E.
With respect to capex , the company expects to incur capex worth Rs200 mn plus in CY15E and
Rs250 mn in CY16E however including Mumbai metro project (one package) will not increase
capex significantly (can increase capex by Rs120-150 mn) as TBMs will be taken on operational
lease.
Exhibit 13: Net Working Capital Days
Net Working Capital (DSO) CY11 CY12 CY13 CY14 1HCY15
Inventories 181 211 220 240 153
Trade Receivables 81 80 93 94 76
Loans and Advances 43 39 50 51 59
Total Current Assets 305 330 363 385 288
Current Liabilities 145 131 154 179 189
Provisions 3 3 4 4 3
Net Working Capital Days 157 196 206 202 96
Source: Company, Emkay Research
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 20
Parentage help in prequalification
ITD Cem is a subsidiary of Thailand-based Italian Thai Development Public Company Ltd, which
holds 52% stake in ITD Cem. Italian-Thai Development Company Limited is the largest
construction company in Thailand (~41% market share) and one of the largest in South East
Asia. The parent company also provides its knowhow, technologies and skilled personnel to ITD.
ITD-Parent is one of the leading infrastructure company based in Thailand. Some of the marquee
projects executed by ITD-Parent include:
Bangkok’s first underground mass transit system comprising of 10.5 km of twin tunnels, 9
underground stations.
Bangkok Mass Transit System - The train systems for this 23 kms project was provided by
Siemens and the whole project was managed by the Siemens ITD Consortium.
Suvarnabhumi International Airport – capacity of 45 mn passengers
Several Dams and tunnels - completed 7 major dams and more than 30 km of large
diameter tunnels in Thailand.
ITD-parent also helps the ITD cementation for pre-qualification requirement in specifically Marine
segment and several other verticals of infrastructure segments. Since 2005, ITD has entered
into 3 separate JV’s with its parent to build for projects in Roads, MRTS, Water and Airport
sectors.
Exhibit 14: Corporate Structure
Source: Company, Emkay Research
ITD Cementation India Limited
Engaged in marine works, highways & bridges, metros, airports, hydro-tunneling, dams & canals, water & sewage and specialist foundation engineering projects.
ITD Cem Maytas Consortium
Design and execution of water conveyor system
ITD Cemindia JV
Construction for road projects
ITD-ITDCem JV
Construction for MRTS and water projects
ITD-ITDCem JV (Consortium of ITD-ITD
Cementation)
Construction of integrated passenger terminal building at Netaji Subash Chandra Bose International airport
95% 80% 49% 40%
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 21
Exhibit 15: Joint Ventures
ITD-ITD Cem JV
ITD-ITD Cem JV
(Consortium of ITD-ITD
Cementation)
ITD Cem Maytas
Consortium ITD Cem india JV
Shareholders ITD Cem – 49%
ITD (Thailand) – 51%
ITD Cem – 40%
ITD (Thailand) – 60%
ITD Cem – 95%
Maytas – 5%
ITD Cem – 80%
ITD (Thailand) – 20%
Key projects Supply and installation of track work for
Bangalore Metro (to be commissioned in
37 months)
Construction of integrated
passenger terminal building
at Netaji Subas Chandra
Bose (International) airport in
Kolkata
Design and execution of
water conveyor system for
government of Andhra
Pradesh
MP2 road: 35 kms stretch
connecting Jhansi and
Shivpuri
Construction of 3 under ground stations
and tunnels for Kolkata Metro
RJ-4: construction of bypass
on NH-76 at Kota
Design and construction of elevated
viaduct including entry exit line, ramp to
depot, and elevated stations for DMRCL
(CC26) worth 5,460 mn
Recently secured contract of Design and
Construction of Tunnels by Shield TBM
under Delhi MRTS Project for DMRCL
(CC32) worth 7,520 mn
Procurement of Ground Water Treatment
Plants
Design, Construction, Supply, Installation,
Commissioning including Mechanical &
Electrical Equipment and Operation in
Agartala worth 399 mn
Laying of Water Trunk Main from Garden
Reach Water Works to Taratala Valve
Station and Laying of Sewer Line along
Diamond Harbour Road by Microtunelling
Method for KEIIP worth 1,459 mn
Contract value Rs25786 mn Rs19261 mn Rs6632 mn Rs4435 mn
Work in hand as
on June 30,
2015
Rs7002 mn Rs51 mn Rs5748 mn Rs831 mn
Source: Company, Emkay Research
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 22
Exhibit 16: Brief History
Year
1931 – 1978 The Cementation Company Limited, U.K, a member of Trafalgar House Group, operated a branch in India
In 1978, the branch office was converted into India subsidiary (named as Cemindia Company Limited) of The Cementation Company Limited, U.K,
1994 Cemindia Company Limited renamed as Trafalgar House Construction India Limited to reflect relationship with its then parent
1996-98 Kvaerner ASA acquired Trafalgar House Plc in 1996
Cemindia Company Limited changed its name to Kvaerner Cementation India Limited
2000-01 Skanska AB acquired Kvaerner Construction Group Limited
Kvaerner Cementation India Limited changed its name to Skanska Cementation India Limited
2004-05 ITD, acquired Skanska AB interest in Skanska Cementation India Limited
Skanska Cementation India Limited changed its name to ITD Cementation India Limited
2006-11 Raised Rs. 564 mn through rights issue in October 2006 (fully subscribed by parent)
Raised Rs. 2,447 mn through rights issue in December 2007 (partially subscribed by parent due to regulatory compulsions)
Entry into MRTS and airport segments with support from parent
2012 Construction of Impounded Wet Basin at Mazagon Dock, Mumbai and Dry Dock in GRSE, Kolkata
Construction of double tier elevated structure for Jaipur Metro
2013 Construction of modernized integrated passenger terminal at Kolkata Airport
Entry in Industrial Segment
Source: Company, Emkay Research
Exhibit 17: Segment Competitor Presence
Segment Main Competitors
Marine structures Afcons, Simplex, Mann Engineering, Navyuga, Samsung,
Hyundai, Vijay Nirman
Specialist works- Piling & Foundation Simplex Infra, Simlex Projects, Valecha, L&T
Industrial Simplex, JMC, L&T, IVRCL, McNally Bharat, Ramky
Hydro, Dams &Tunnels Patel Engineering, HCC, Gammon, JP, Soma, NCC, L&T, Unity
Airports Consolidated Construction, L&T, BL Kashyap, NCC, Punj Lloyd,
Ramky
MRT L&T, Simplex, Gammon, CEC-CICI, IJM, Welspun, IL&FS
Highways & Bridges GMR, Ramky, L&T, IL&FS, IRB, Gammon, HCC,
Water & Sewage IVRCL, Pratibha, NCC, L&T, Thermax, Jindal, KSB
Source: Company, Emkay Research
Exhibit 18: Equipment List
Equipment (Excluding JV Assets) Number of units
Hydraulic and rotatory rigs 38
Cranes 34
Excavators 39
Crushers 3
Batching plants 34
Sensor Pavers 8
Hot Mix Plants 4
Hydraulic RCD Rig 1
TBM 2
Cantilever Gantry 6
Launching Segment Girder 3
Total 172
Source: Company, Emkay Research
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 23
Key Financials (Consolidated)
Income Statement
Y/E Dec (Rs mn) FY16 FY17 CY13 CY14 1HCY15
Net Sales 16,976 16,509 15,841 17,189 13,201
Expenditure 15,308 14,597 14,216 16,279 12,371
EBITDA 1,668 1,912 1,625 911 830
Depreciation 420 506 442 427 214
EBIT 1,247 1,405 1,183 484 617
Other Income 94 100 340 185 124
Interest expenses 1,060 1,195 1,283 1,355 729
PBT 282 311 239 (686) 12
Tax 56 91 146 75 (292)
Extraordinary Items 1 3 1 (955) (1240)
Minority Int./Income from Assoc. 0 0 0 0 0
Reported Net Income 227 223 94 194 (935)
Adjusted PAT 226 220 93 (761) 305
Balance Sheet
Y/E Dec (Rs mn) FY16 FY17 CY13 CY14 1HCY15
Equity share capital 115 115 115 155 155
Reserves & surplus 3,697 3,890 3,969 5,523 4,585
Net worth 3,812 4,005 4,084 5,678 4,740
Minority Interest 0 0 0 0 0
Loan Funds 6,509 7,834 7,695 7,653 6,720
Net deferred tax liability (126) (177) (212) (149) (482)
Total Liabilities 10,194 11,662 11,567 13,183 10,978
Net block 2,287 2,297 2,236 3,385 3,320
Investment 0 0 0 0 0
Current Assets 14,562 15,292 16,089 18,413 18,777
Cash & bank balance 379 368 319 272 1,148
Other Current Assets 6,361 7,477 7,533 9,023 7,533
Current liabilities & Provision 6,892 6,066 6,825 8,615 11,120
Net current assets 7,670 9,225 9,264 9,798 7,055
Misc. exp 0 0 0 0 0
Total Assets 10,194 11,661 11,567 13,183 10,978
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 24
Key Ratios
Profitability (%) FY16 FY17 CY13 CY14 1HCY15
EBITDA Margin 9.8 11.6 10.3 5.3 6.3
EBIT Margin 7.3 8.5 7.5 2.8 4.7
Effective Tax Rate 19.8 29.3 61.1 22.0 (24.0)
Net Margin 1.3 1.3 0.6 1.1 2.3
ROCE 12.9 12.7 10.0 3.9 -
ROE 6.1 5.5 2.3 4.0 -
RoIC 14.0 13.6 10.6 7.4 -
Per Share Data (Rs) FY16 FY17 CY13 CY14 1HCY15
EPS 19.6 19.1 8.1 (49.0) 2.0
CEPS 56.1 63.0 46.5 (21.5) 3.3
BVPS 330.9 347.6 354.5 365.9 30.54
DPS 2.0 2.0 1.0 0.0 0.0
Valuations (x) FY16 FY17 CY13 CY14 1HCY15
PER 40.9 42.5 100.4 64.0 -
P/CEPS 14.3 12.7 17.3 20.0 -
P/BV 2.6 2.4 2.3 2.3 -
EV / Sales 0.9 1.0 1.1 1.2 -
EV / EBITDA 9.4 8.9 10.4 22.0 -
Dividend Yield (%) 0.2 0.2 0.1 0.0 -
Gearing Ratio (x) FY16 FY17 CY13 CY14 1HCY15
Net Debt/ Equity 1.6 1.9 1.8 1.3 1.2
Net Debt/EBIDTA 3.7 3.9 4.5 8.1 -
Working Cap Cycle (days) 156.8 195.8 206.1 202.1 96.5
Growth (%) FY16 FY17 CY13 CY14 1HCY15
Revenue 17.3 (2.8) (4.0) 8.5 -
EBITDA 18.8 14.6 (15.0) (43.9) -
EBIT 26.6 12.7 (15.9) (59.1) -
PAT 136.2 (1.6) (57.7) (918.0) -
Quarterly (Rs mn) Q2CY14 Q3CY14 Q4CY14 Q1CY15 Q2CY15
Revenue 4,164 4,078 5,141 5,877 7,323
EBITDA 292 152 207 321 509
EBITDA Margin (%) 7.0 3.7 4.0 5.5 6.9
PAT (24) (220) (415) 273 32
EPS (Rs) (2.1) (17.3) (26.8) 1.8 0.2
Shareholding Pattern (%) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Promoters 51.6 51.6 51.6 51.6 51.6
FIIs 3.0 3.4 3.4 3.4 3.5
DIIs 23.7 23.0 24.0 24.0 23.9
Public and Others 21.8 21.9 20.9 20.9 20.9
ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update
Emkay Research | September 22, 2015 25
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