McnallyBharat_SKPSec_090611[1]

8/6/2019 McnallyBharat_SKPSec_090611[1]

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SKP Securities Ltd www.skpmoneywise.com Page 1 of 7

Company profile:- Incorporated in 1961, it is a part of the Williamson

Magor Group, it is one of the leading Engineering companies, engaged

in providing turnkey solutions in areas of Power, Steel, Material

Handling, Mineral Benefication and other services. It has majorcustomers both in the private and public sector for the above

mentioned projects specialties.

Key Share DataFace Value (Rs.) 10

Equity Capital (Rs. Crs) 31.09Market. Capitalization (Rs. Crs) 534.44

52-wk Hi h Low Rs. 319 171Average Yearly Volume 26173BSE code 532629NSE code MBECLReuters code MCNL.BOBloomberg code MCNA IN

Shareholding Pattern 31st March,2011Foreign

13%

Institutio

19%

Non Prom Corp

15%

Promoters

31%

Public

22%

Financials (Rs. Crs)

FY10 FY11 FY12E FY13E

Net Sales 1803 2211 2756 3347Sales Gr 58.71% 22.62% 24.64% 21.44%EBIDTA 172 192 221 268AdjPAT 51 62 77 100PAT Gr 82.14% 21.56% 24.19% 29.87%AdjEPS 16.40 19.94 24.77 32.16

Key Financial Ratios


P/E 26.78 10.95 6.94 5.34

P/BV 4.05 1.72 1.45 1.30

MCap/Sales 0.61 0.24 0.19 0.16

EV/EBIDTA 10.17 3.88 3.37 2.78

ROCE 28.24% 23.03% 24.01% 25.92%

RONW 21.31% 19.93% 20.92% 24.39%

EBITDM(%) 9.48% 8.70% 8.04% 7.99%

NPM (%) 3.14% 3.19% 3.15% 3.35%

Debt-Equity 1.32 1.22 1.08 1.05

Current Ratio 1.10 1.26 1.24 1.23

Source:- Capitaline, SKP Research

Mcnally Bharat v/s BSE SmallCap

-0.6

-0.4

-0.2

0

0.2

0.4

McNally BSESMALLCAP

Analyst: Pinaki Banerjee

Tel No.: +91 33 4007 7416; Mobile: +919674040602

Email: [email protected]

Steady growth in top line on a standalone basis

Top line records 22.70% and 18.10% growth for the quarterand financial year respectively on the back of strong order

booking and higher revenues from the power sector which

contributed about 48% to the topline.

Healthy Order books

The order books as on April 2011 stood at Rs 3950 cr asagainst Rs 3740 cr at the end of FY10 registering a growth of6%(YoY) .

Substantial rise in input costs to put margins under pressure.

With the prices of commodities on a rise, margins areexpected to come under slight pressure. However, as most of

the unexecuted projects have a price variation clause, the

company shall be in a position to absorb the rise.

Shortage of manpower at the construction level has forcedthe company to go in for more mechanized construction

activity. In addition it has also to give out substantial amount

of incentives to the top level people in order to retain them.

Mixed performance by its subsidiaries

The performance of its Indian Subsidiary Mcnally Sayaji hasbeen muted in FY11 where it reported a top line de growth

of 4% and the bottom line fell by 22% on account of lower

realizations and higher interest and depreciation on

additional capacity created. The outlook for FY12 is however

positive. The German subsidiary is performing well and is

expected to do so in future.

Monday, June 06, 2011

SKP Coverage-Follow-up

Mcnally Bharat Engineering Company Ltd Target Rs 225

June 6, 2011

Valuations

At the CMP of Rs 172, the stock is trading at 5.34x FY13E EPS of Rs

32.16. We would assign a target of Rs 225 in the next 15 months

indicating a rise of 31% from the present levels, where it would be

trading at around 7x FY13E EPS.

CMP Rs.172


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Mcnally Bharat Engineering Company Ltd


Q4FY11 Result Overview(Rs Cr)

Particulars Q4FY11 Q4FY10 % Chg FY11 FY10 % Chg

Net Sales 690.02 562.41 22.70% 1753.71 1484.37 18.10%

Other Operating Income 3.79 0.00 - 4.58 0.71 545.10%

Other Income 1.01 2.70 -62.60% 11.30 2.28 395.60%

Total Income 694.82 565.11 23.00% 1769.59 1487.36 19.00%

Total Expenditure 652.66 521.62 25.12% 1654.98 1398.66 18.30%

Raw Materials Consumed 373.90 334.39 11.78% 920.59 899.14 2.40%

Staff Costs 31.85 20.47 55.59% 120.44 73.17 64.60%

Other Mfg. Expenditure 246.91 166.66 48.05% 613.95 426.35 44.00%

Operating Margins (%) 6.11% 7.73% - 6.54% 5.98% -

PBIDT 42.16 43.49 -3.10% 114.61 88.70 29.20%

Interest 8.57 6.92 23.80% 33.84 30.50 11.00%

PBDT 33.59 36.57 -8.10% 80.77 58.20 38.80%

Depreciation 2.25 1.41 59.60% 8.28 4.96 66.90%

Tax 9.00 12.72 -29.20% 23.00 17.52 31.30%

PAT 22.34 22.44 -0.40% 49.49 34.69 42.70%

Extraordinary Items 0.00 0.92 - 0.00 0.00 -

APAT 22.34 21.52 3.80% 49.49 34.69 42.70%

Earnings Per Share (Rs.) 7.18 7.22 -0.60% 15.92 11.16 42.70%

Source:- Capitaline

5 Year Perfromance

516 561

968

1484

1754

24 38 5589 115

49353422170

500

1000

1500

2000

FY07 FY08 FY09 FY10 FY11

AmtInRsCr

Net SalesEBIDTAPAT


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Source:- Company Data

Future Outlook

Profitable opportunities abound

Mcnally Sayaji expected to put up a better performance

The performance of this subsidiary had remained muted as two of its plants at Asansol and Baroda were

not running at full capacity due to capacity expansion and modernization work. The Asansol plant hasalmost stabilized and the baroda plant is expected to be operational by August 2011. The order books

are about Rs 215 cr as on April 2011.

Standlone Sales Break Up

2%19%

31%

48%

Infrastructure

Material&Non-

FerrousSteel

Power

Order Book berak Up- SBG Wise

23%

4%

41%

32%

Infrast

Proces

Steel

Power

With the huge investment outlay of about Rs 214,000 cr for the infrastructure development of thecountry by the Union Government, the company stands to reap the benefits for its experience and

technical capabilities in executing large projects.

The power segment is expected to be the main revenue drivers in the coming periods with the UnionGovernment allocating about Rs 9000-10000 cr for the development of power in the country.

The company has started to focus more rigorously into the Oil & Gas, nuclear power and EPC in thecement sector. While it is not giving much importance in the nuclear power segment for the present,

the other two segments hold out a good promise. The order books are good in the Oil & Gas segment

for onshore construction and mechanical jobs. A lot of progress has been made in the EPC segment also

and the company is expecting an order book in the range of Rs 500-1000 cr in this segment.


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German Subsidiary performance to be in line with expectations

The German business has an order book of about Rs 400 cr and is focusing on Coal, Iron and Tungsten

business. It presently has no borrowings at is expected to report an EBIDTA of around 8%-10% in FY12.

International orders to contribute about 24% of its top line in the next 2-3 years

The company has been able to successfully spread its business outside India. Zambia copper mines,

Mongolia, Brazil and Chile hold out good opportunities.

Expects to execute at least 58%-60% of the order books in hand at present on a consolidated basis

Consolidated Order Books and Sales

3250

51284713

5500

18022246

28003400

0

1000

2000

3000

4000

5000

6000


Financial Years

AmtInRsCr

Order Books

Income

Source:- Capitaline, SKP Research

Source:- Capitaline, SKP Research **NP before Minority Interest

Operating Profit and Margins

268

221

192172

7.998.7

9.48

8.04

0

50

100

150

200

250

300

FY10 FY11P FY12E FY13E

Financial Years

AmtInRsCr

7

7.5

8

8.5

9

9.5

10

In%

Operating Profit

OPM

Net Profit and Margins

5670

87

112

3.14

3.19

3.35

3.15

0

20

40

60

80

100

120


Financial Years

AmtInRsCr

33

33

3

3

33

3

Net Pro

NPM


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Concerns

Valuations

At the CMP of Rs 172, the stock is trading at 5.34x FY13E EPS of Rs 32.16. We would assign a target of

Rs 225 in the next 15 months indicating a rise of 31% from the present levels, where it would be trading

at around 7x FY13E EPS.

Delays in execution of projectsDelays in projects executions are the key risks faced by any infrastructure company. Mcnally too had to

face the same in FY11 where projects got delayed, bids got delayed and projects have been deferred.Similar risks always lie ahead also as indicated by the management leading to rise in expenses and fall in

revenue.

Shortage of quality manpowerThe company is facing a shortage of labour at the construction level due to which it had to invest

substantially in procuring more machines. At the executive level too the company had to pay out huge

incentives to the key persons in order to retain the talent.


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Income StatementParticulars


Net sales 1803 2211 2756 3347

Growth (%) 58.71%. 22.62% 24.64% 21.44%

Other Income 14 18 28 40

Stock Adjustments -32 13 20 24

Total Income 1785 2242 2804 3412

Raw Material Consumed 437 561 755 900

Power and Fuel Cost 10 13 16 19

Employee Cost 124 153 191 223

Other Mfg Expenses 863 1123 1372 1700

Selling and Admn Expenses 140 155 193 234

Misc Expenses 39 45 56 68

Total Expenditure 1613 2050 2583 3144

Operating Profit 172 192 221 268

OPM(%) 9.48% 8.70% 8.04% 7.99%

Interest 65 68 72 77

Depreciation 16 19 20 23

PBT 91 105 129 167

Tax 33 35 43 55

PAT 58 70 87 112

Minority Int 7 8 10 12

Adj.PAT 51 62 77 100

Adj.EPS 16.40 19.94 24.77 32.16

NPM(%) 3.14% 3.19% 3.15% 3.35%

Balance SheetParticulars FY10 FY11E FY12E FY13

Equity Capital 31 31 31 31

Reserves 232 280 337 379

Net Worth 263 311 368 410

Minority Interest 53 60 69 75

Secured Loan 341 372 392 421

Unsecured Loan 7 8 8 9

Total Liabilities 664 751 837 915

Net Fixed Assets 321 344 354 381Capital WIP 4 4 5 5

Investments 3 3 3 3

Inventories 117 142 197 258

Accounts receivable 1135 1235 1540 180

Cash & Bank 126 169 190 196

Loan & Advances 294 404 560 612

Current Assets 1672 1950 2488 286

Current Liab. 1293 1522 1978 229

Provisions 23 28 35 43

Total Curr. liab. & prov. 1316 1550 2013 234

Net Current Assets 356 400 475 526

Net Deferred Tax -20 - - -

Total Assets 664 751 837 915

Cash Flow Statement

Particulars FY10 FY11E FY12E FY13E

Profit before Tax 90 105 129 167

Add: Depreciation, Int. & Other

Expenses70 87 92 100

Net changes in WC, tax interest -124 -66 -113 -160

Cash flow from operating

activities36 126 108 107

Cash flow from investing activities -77 -42 -30 -50

Cash flow from financing activities 125 -41 -57 -51

Net Increase/Decrease in Cash &

Cash Equivalents84 43 21 6

Opening Cash Balance 42 126 169 190

Closing Cash Balance 126 169 190 196

Key Ratios

Particulars FY10 FY11E FY12E FY13

Valuation Ratios

P/E 26.78 10.95 6.94 5.3

P/BV 4.05 1.72 1.45 1.3

EV/EBIDTA 10.17 3.88 3.37 2.7

Mkp/Sales 0.61 0.24 0.19 0.1

Earnings Ratios

OPM 9.48% 8.70% 8.04% 7.99

NPM 3.14% 3.19% 3.15% 3.35

ROCE 28.24% 23.03% 24.01% 25.9RONW 21.31% 19.93% 20.92% 24.3

Balance Sheet Ratios

Current Ratio 1.1 1.26 1.24 1.2

Debt/Equity 1.32 1.22 1.08 1.0

Debtor days 197 198 198 19

Inventory Days 28 27 29 3

Consolidated Financials In Rs. Cror


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Thomson First Call & Investext Myiris, Moneycontrol, Ticker plant and ISI Securities

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McnallyBharat_SKPSec_090611[1]