Simplex Infrastructures Result Updated

8/3/2019 Simplex Infrastructures Result Updated

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

Y/E March (` cr) 3QFY12 3QFY11 2QFY12 % chg (yoy) % chg (qoq)

Net sales 1,594.3 1,166.7 1,322.0 36.7 20.6

Operating profit 127.4 107.6 119.0 18.4 7.0

Net profit 18.0 23.2 17.9 (22.3) 0.9

Source: Company, Angel Research

For 3QFY2012, Simplex Infra’s (Simplex) numbers came above our and street’s

expectations on the revenue and earnings front and marginally lower at the

EBITDAM level. At the end of the quarter, the company’s order book stood at

` 14,442cr (2.9x FY2011 revenue). Order inflow for the quarter stood at

` 1,018cr, with the company having L1 orders worth ` 2,565cr. We are revising

our estimates for FY2012 and FY2013 upwards owing to better-than-expected

performance during the quarter. We maintain our Buy view on the stock.

Healthy set of numbers: On the top-line front, Simplex reported robust growth of

36.7% yoy to ` 1,594cr, higher than our estimate of ` 1,348cr (consensus

` 1,145cr). This performance was on account of 40% and 15% yoy growth in the

domestic and overseas segments, respectively. EBITDAM dipped by 120bp yoy to

8.0% for the quarter, marginally lower than our estimate of 8.6%. Interest cost

came in at ` 55.0cr, reporting a jump of 52.0% yoy/7.6% qoq and in-line with

our estimate of ` 54.3cr. PAT declined by 22.3% yoy to ` 18.0cr, above our

estimate of ` 13.6cr. Better-than-expected bottom-line performance was due to

robust revenue growth during the quarter.

Outlook and valuation: Prior to 2QFY2012, Simplex’s performance was affected

by slowdown on the execution front, stretched working capital and subdued

order inflow. However, in the past two quarters, Simplex’s performance has

improved, with execution and order inflow picking up along with improvement

on the working capital front (during 3QFY2012). Hence, we have revised our

estimates upwards for FY2012 and FY2013. Our revised target price for the

stock is `261 (`233), based on 9x FY2013E earnings, implying an upside of

30.9%. Hence, we recommend Buy on the stock.

Key financials (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E

Net Sales (incl op. income) 4,564 4,889 5,961 6,732

% chg (3.1) 7.1 21.9 12.9

Adj. Net Profit 127.1 106.7 119.0 144.3

% chg 9.2 (16.1) 11.5 21.3

FDEPS (`) 25.6 21.5 24.0 29.1

EBITDA Margin (%) 10.0 9.8 9.4 9.5

P/E (x) 7.8 9.3 8.3 6.9

RoAE (%) 13.5 10.3 10.4 11.4

RoACE (%) 13.0 11.8 11.6 11.9P/BV (x) 1.0 0.9 0.8 0.7

EV/Sales (x) 0.5 0.5 0.5 0.4

EV/EBITDA (x) 4.8 5.3 5.6 4.7


BUYCMP ` 200

Target Price ` 261

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 55.0

MF / Banks / Indian Fls 25.2

FII / NRIs / OCBs 14.7

Indian Public / Others 5.2

Abs. (%) 3m 1yr 3yr

Sensex 4.3 (1.9) 91.8

Simplex (1.4) (40.4) 33.2

Face Value ( ` )

BSE SensexNifty

Reuters Code

988

0.4

366/157

3,615

Infrastructure

Avg. Daily Volume

Market Cap ( ` cr)

Beta

52 Week High / Low

2

17,8495,416

SINF.BO

SINF@IN

Shailesh Kanani

022-39357800 Ext: 6829

[email protected]

Nitin Arora

022-39357800 Ext: 6842

[email protected]

Simplex Infrastructures

Performance Highlights

3QFY2012 Result Update | Infrastructure

February 14, 2012



Simplex Infra | 3QFY2012 Result Update

February 14, 2012 2

Exhibit 1: Quarterly performance (Standalone)

Y/E March (` cr) 3QFY12 3QFY11 2QFY12 % chg (yoy) % chg (qoq) 9MFY12 9MFY11 % chg

Net Sales 1,594 1,167 1,322 36.7 20.6 4,177 3,395 6.9

Total Expenditure 1,467 1,059 1,203 38.5 21.9 3,811 3,062 7.0Operating Profit 127 108 119 18.4 7.0 367 333 5.9

OPM (%) 8.0 9.2 9.0 (120)bp (100)bp 9 10 (100)bp

Interest 55 36 51 52.0 7.6 156 94 17.9

Depreciation 49 40 44 20.9 10.2135 119 5.7

Non Operating Income 3 3 2 (2.0) 38.9 13 7 31.7

Nonrecurring items - - - - - - - -

Profit Before tax 27 34 26 (22.0) 3.1 88 128 0.8

Tax 9 11 8 (21.4) 8.1 28 41 4.0

Net Profit before MI 18 23 18 (22.3) 0.9 60 86 (1.1)

PAT (%) 1.1 2.0 1.4 - - 1.4 2.5 -

Minority Interest (MI) - - - - - - - -

Net Profit after MI 18 23 18 (22.3) 0.9 60 86 (1.5)

Adj. PAT (%) 1.1 2.0 1.4 - - 1.4 2.5 -

Adj. FDEPS 3.6 4.7 3.6 (22.3) 0.9 12.1 17.4 (1.5)


Exhibit 2: 3QFY2012 Actual vs. Estimates

(` cr) Estimates Actual Variation (%)

Net Sales 1,348.4 1594.3 18.2

EBITDA 116.4 127.4 9.4

EBITDAM (%) 8.6 8.0 (60)bp

Interest and Financial Charges 54.3 55.0 1.3

PAT 13.6 18.0 32.7


Robust top-line growth

On the top-line front, Simplex reported robust growth of 36.7% yoy to ` 1,594cr,

higher than our estimate of ` 1,348cr (consensus ` 1,145cr). This better-than-

expected performance was on account of 40% and 15% yoy growth in the

domestic and overseas segments, respectively. At the end of the quarter, the

company’s order book stood at ` 14,442cr (2.9x FY2011 revenue). Order inflow

for the quarter stood at ` 1,018cr, down 47.8% qoq and 52.2% yoy. As per

management, the infrastructure, building and power segments have witnessed

good order inflow activity, whereas the industrial segment has seen poor order

awarding activity. Further, for FY2012, management expects to achieve order

inflow of ~ ` 7,000cr ( ` 6,000cr already achieved) and accordingly we are factoring

in order inflow of ` 7,696cr and ` 8,194cr for FY2012 and FY2013, respectively.




February 14, 2012 4

Exhibit 7: Order inflow for 3QFY12 – Segment wise (%)


Exhibit 8: Order backlog – Segment wise (%)


Outlook and valuation

Prior to 2QFY2012, Simplex’s performance was affected by slowdown the on

execution front, stretched working capital and subdued order inflow. However, in

the past two quarters, Simplex’s performance has improved, with execution and

order inflow picking up along with improvement on the working capital front

(during 3QFY2012). Hence, we have revised our estimates upwards for FY2012

and FY2013. Our revised target price for the stock is `261 (`233), based on 9x

FY2013E earnings, implying an upside of 30.9%. Hence, we recommend Buy on

the stock.

Exhibit 9: Historical one-year forward PE band


0

5

10

15

20

25

30

35

40

45

1 4 - F e b - 0 5

1 4 - M a y - 0 5

1 4 - A u g - 0 5

1 4 - N o v - 0 5

1 4 - F e b - 0 6

1 4 - M a y - 0 6

1 4 - A u g - 0 6

1 4 - N o v - 0 6

1 4 - F e b - 0 7

1 4 - M a y - 0 7

1 4 - A u g - 0 7

1 4 - N o v - 0 7

1 4 - F e b - 0 8

1 4 - M a y - 0 8

1 4 - A u g - 0 8

1 4 - N o v - 0 8

1 4 - F e b - 0 9

1 4 - M a y - 0 9

1 4 - A u g - 0 9

1 4 - N o v - 0 9

1 4 - F e b - 1 0

1 4 - M a y - 1 0

1 4 - A u g - 1 0

1 4 - N o v - 1 0

1 4 - F e b - 1 1

1 4 - M a y - 1 1

1 4 - A u g - 1 1

1 4 - N o v - 1 1

1 4 - F e b - 1 2

P/E 7YEAR AVG 5YEAR AVG 3YEAR AVG




February 14, 2012 5

Exhibit 10: Change in estimates

FY2012E FY2013E

Earlier estimates Revised estimates Variation (%) Earlier estimates Revised estimates Variation (%)

Revenues ( ` cr) 5,561.7 5,960.5 7.2 6,485 6,732 3.8

EBITDA Margins (%) 9.4 9.4 - 9.5 9.5 -

PAT ( ` cr) 94.0 119.0 26.6 128.6 144.3 12.2


Exhibit 11: Key assumptions

(` cr) FY2007 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

Order Inflow 2,180 6,694 5,786 5,996 8,382 7,696 8,194

Revenues 1,708 2,808 4,713 4,564 4,889 5,961 6,732

Order Backlog (Y/E) 5,100 8,985 10,059 11,491 15,117 16,852 18,315

OB to Sales ratio (x) 3.0 3.2 2.1 2.5 3.1 2.8 2.7


Exhibit 12: Angel EPS forecast vs. consensus

Angel Forecast Bloomberg Consensus Variation (%)

FY2012E 24.0 20.3 (15.3)

FY2013E 29.1 26.7 (8.3)


Investment argument

Diversified play

Simplex is one of the oldest infrastructure companies in India (over eight decades

of work log). Since inception, the company has been involved in the different

segments of the infrastructure sector, from piling (1924) to power (1960), to roads,

railways and bridges (1980), and the real estate business (2007). The company

has executed ~2,400 projects and is currently involved in >150 ongoing projects

in India and abroad. This indicates the company's execution capabilities, apart

from qualifying it to successfully execute complex and numerous projects on time.

The company is also well spread geographically, with a presence in theMiddle-Eastern countries of Qatar, Oman, Dubai and Abu Dhabi and now

venturing in newer territories such as Bangladesh. In terms of its client profile,

Simplex has a healthy mix of government and private sector projects. This

successful diversification has not only provided the company the experience of

executing different and complex projects but has also qualified it to bid for bigger

ticket-size projects going ahead.




February 14, 2012 6

Exhibit 13: Recommendation summary

Company CMP TP Rating Top-line (` cr) EPS (`) Adj. P/E (x) OB/

FY11 FY12E FY13E CAGR (%) FY11 FY12E FY13E CAGR (%) FY11 FY12E FY13E Sales (x)

ABL 195 245 Buy 1,302 1,648 1,853 19.3 19.2 21.7 25.4 15.2 10.2 9.0 7.7 4.2CCCL 18 17 Reduce 2,199 2,258 2,646 9.7 2.5 (1.5) 2.4 (3.6) 7.1 - 7.7 2.7

HCC 29 - Neutral 4,093 3,915 4,633 6.4 1.2 (3.1) 0.6 (25.8) 24.9 - 45.3 4.0

IRB Infra 176 182 Neutral 2,438 3,176 3,781 24.5 13.6 14.2 13.1 (2.0) 12.9 12.5 13.5 -

ITNL 211 235 Accu. 4,049 5,178 6,619 27.9 22.3 22.9 26.0 7.8 9.4 9.2 8.1 5.2

IVRCL 61 - Neutral 5,651 5,426 6,458 6.9 5.9 3.4 4.6 (11.5) 10.4 18.1 13.3 4.5

JP Assoc. 79 88 Accu. 13,832 13,763 16,017 7.6 5.5 2.7 4.2 (12.6) 14.5 29.1 18.9 -

L&T 1,379 1,608 Buy 43,905 53,779 60,258 17.2 54.3 63.7 70.9 14.2 25.4 21.7 19.5 3.3

Madhucon 67 77 Buy 1,816 1,952 2,503 17.4 5.6 4.4 4.7 (8.1) 12.0 15.1 14.2 3.8

NCC 62 61 Neutral 5,074 4,946 5,790 6.8 6.4 1.4 3.5 (26.1) 9.8 45.2 17.9 4.3

Patel Engg 117 - Neutral 3,476 3,573 3,609 1.9 17.6 14.9 14.8 (8.3) 6.6 7.8 7.9 2.7

Punj Lloyd 62 - Neutral 7,850 10,147 10,592 16.2 (5.4) 3.5 2.9 - - 17.5 21.2 3.6

Sadbhav 142 157 Accu. 2,209 2,602 2,585 8.2 8.0 9.3 9.2 7.3 17.8 15.3 15.4 2.7

Simplex In. 200 261 Buy 4,889 5,961 6,732 17.3 21.5 24.0 29.1 16.3 9.3 8.3 6.9 2.9


Exhibit 14: SOTP breakup

Company Core Const. Real Estate Road BOT Invst. In Subsidiaries Others Total

` % to TP ` % to TP ` % to TP ` % to TP ` % to TP ` ABL 104 42 - - 141 58 - - - - 245

CCCL 17100

--

--

--

--

17HCC 4 12 12 37 16 51 - - - - 32

IRB Infra 116 64 - - 61 34 4 2 - 182

ITNL 59 25 - - 152 65 - - 25 10 235

IVRCL 37 66 - - - - 19 34 - - 56

JP Assoc. 31 35 24 27 - - - - 33 37 88

L&T 1,276 79 - - - - 332 21 - - 1,608

Madhucon 23 30 2 3 52 68 - - - 77

NCC 29 48 2 3 8 14 - - 22 35 61

Patel Engg 55 51 17 16 16 15 - - 19 18 106

Punj Lloyd 71 100 - - - - - - - - 71

Sadbhav 83 53 - - 75 47 - - - - 157

Simplex In. 261 100 - - - - - - - - 261





February 14, 2012 7

Profit & loss statement (Consolidated)

Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

Net Sales 2,808 4,696 4,552 4,875 5,947 6,718

Other operating income - 16 12 14 14 14Total operating income 2,808 4,713 4,564 4,889 5,961 6,732

% chg 64.4 67.8 (3.1) 7.1 21.9 12.9

Total Expenditure 2,545 4,309 4,110 4,412 5,403 6,095

Net Raw Materials 1,275 2,149 1,856 1,945 2,396 2,693

Other Mfg costs 279 483 504 617 657 740

Personnel 839 1,413 1,472 1,571 2,011 2,275

Other 152 263 278 279 339 386

EBITDA 264 404 454 477 557 637

% chg 65.6 53.2 12.5 5.1 16.8 14.2

(% of Net Sales) 9.4 8.6 10.0 9.8 9.4 9.5

Depreciation& Amortisation 64 132 157 167 184 206

EBIT 199 272 297 310 373 431

% chg 66.0 36.4 9.2 4.6 20.2 15.6

(% of Net Sales) 7.1 5.8 6.5 6.4 6.3 6.4

Interest & other Charges 109 151 122 148 235 255

Other Inc (incl pft from Ass/JV) 37 46 26 38 40 40

(% of PBT) 28.8 27.5 13.0 18.8 22.2 18.5

Recurring PBT 127 166 201 200 178 216

% chg 81.1 30.8 20.6 (0.1) (11.1) 21.3

Extraordinary Expense/(Inc.) - (7) - (18) - -

PBT (reported) 127 173 201 218 178 216

Tax 37 49 71 92 58 70

(% of PBT) 29.1 28.3 35.6 42.3 32.4 32.4

PAT (reported) 90 124 129 126 120 146

Less: Minority interest (MI) - 0.8 1.9 1.4 1.3 1.6

Prior period items - - - - - -

PAT after MI (reported) 90 123 127 125 119 144

ADJ. PAT 90 116 127 107 119 144

% chg 67.7 29.3 9.2 (16.1) 11.5 21.3

(% of Net Sales) 3.2 2.5 2.8 2.2 2.0 2.1

Basic EPS (`) (Reported) 18.2 24.9 25.6 25.1 24.0 29.1Fully Diluted EPS (̀ ) (Diluted) 18.1 23.5 25.6 21.5 24.0 29.1

% chg 67.7 29.3 9.2 (16.1) 11.5 21.3




February 14, 2012 8

Balance sheet (Consolidated)


SOURCES OF FUNDS

Equity Share Capital 10 10 10 10 10 10Preference Capital - - - - - -

Reserves & Surplus 743 899 968 1,078 1,185 1,318

Shareholder’s Funds 753 909 978 1,088 1,195 1,328

Minority Interest - 1 5 6 6 6

Total Loans 749 1,220 1,302 1,661 2,216 2,220

Deferred Tax Liability 37 58 88 138 138 138

Total Liabilities 1,540 2,189 2,374 2,893 3,555 3,693

APPLICATION OF FUNDS

Gross Block 757 1,219 1,277 1,509 1,684 1,859

Less: Acc. Depreciation 127 208 289 385 495 616

Net Block 629 1,011 988 1,123 1,189 1,243

Capital Work-in-Progress 24 14 19 27 30 33

Investments 10 2 3 23 78 183

Current Assets 2,152 2,946 3,125 3,767 4,705 5,183

Inventories 474 679 671 811 1,061 1,226

Sundry Debtors 1,150 1,682 1,806 2,298 2,851 2,899

Cash 123 119 110 108 76 213

Loans & Advances 321 338 398 405 540 646

Other 83 127 140 145 176 199

Current liabilities 1,276 1,784 1,760 2,048 2,447 2,949

Net Current Assets 876 1,162 1,364 1,719 2,258 2,233

Misc. Exp. not written off - - - - - -

Total Assets 1,540 2,189 2,374 2,893 3,555 3,693




February 14, 2012 9

Cash flow statement (Consolidated)


Profit before tax (excluding MI) 127 173 201 217 177 214

Depreciation 37 79 92 96 109 121Change in Working Capital 181 358 314 357 571 (161)

Less: Other income 37 46 26 38 40 40

Direct taxes paid 23 30 46 16 58 70

Cash Flow from Operations (76) (181) (93) (97) (382) 387

(Inc.)/ Dec. in Fixed Assets (328) (408) (118) (241) (178) (178)

(Inc.)/ Dec. in Investments (5) 8 (1) (20) (55) (105)

Other income 37 46 26 38 40 40

Cash Flow from Investing (296) (355) (93) (223) (193) (243)

Issue of Equity 429 - - - - -

Inc./(Dec.) in loans 62 444 107 358 555 5

Dividend Paid (Incl. Tax) 8 12 12 11 12 12

Others (31) 100 82 (29) - -

Cash Flow from Financing 452 532 177 318 543 (7)

Inc./(Dec.) in Cash 81 (4) (9) (2) (32) 137

Opening Cash balances 42 123 119 110 108 76

Closing Cash balances 123 119 110 108 76 213




February 14, 2012 10

Key Ratios

Y/E March FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

Valuation Ratio (x)

P/E (on FDEPS) 11.0 8.5 7.8 9.3 8.3 6.9P/CEPS 7.8 5.1 4.5 4.9 4.3 3.7

P/BV 1.3 1.1 1.0 0.9 0.8 0.7

Dividend yield (%) 1.0 1.0 1.0 1.0 1.0 1.0

EV/Sales 0.6 0.4 0.5 0.5 0.5 0.4

EV/EBITDA 6.1 5.2 4.8 5.3 5.6 4.7

EV / Total Assets 1.1 1.0 0.9 0.9 0.9 0.8

Order Book to Sales 3.2 2.1 2.5 3.1 2.8 2.7

Per Share Data (`)EPS (Basic) 18.2 24.9 25.6 25.1 24.0 29.1

EPS (fully diluted) 18.1 23.5 25.6 21.5 24.0 29.1

Cash EPS 25.6 39.3 44.2 40.9 46.0 53.4

DPS 2.0 2.0 2.0 2.0 2.0 2.0

Book Value 152 183 197 219 241 267

DuPont Analysis

EBIT margin 7.1 5.8 6.5 6.3 6.3 6.4

Tax retention ratio 0.7 0.7 0.6 0.6 0.7 0.7

Asset turnover (x) 2.4 2.7 2.1 1.9 1.9 1.9

ROIC (Post-tax) 12.0 11.2 8.8 7.1 8.0 8.4

Cost of Debt (Post Tax) 10.7 11.0 6.2 5.8 8.2 7.8

Leverage (x) 1.2 1.0 1.2 1.3 1.6 1.6

Operating ROE 13.5 11.4 11.9 8.9 7.8 9.4

Returns (%)

ROACE (Pre-tax) 15.8 14.6 13.0 11.8 11.6 11.9

Angel ROIC (Pre-tax) 16.9 15.6 13.7 12.3 11.9 12.4

ROAE 17.5 14.0 13.5 10.3 10.4 11.4

Turnover ratios (x)

Asset Turnover (Gross Block) 4.7 4.8 3.7 3.5 3.7 3.8

Inventory / Sales (days) 49 45 54 55 57 62

Receivables (days) 130 110 139 153 158 156

Payables (days) 130 116 141 141 137 145

Wcap cycle (ex-cash) (days) 86 70 92 107 116 114Solvency ratios (x)

Net debt to equity 0.8 1.2 1.2 1.4 1.8 1.5

Net debt to EBITDA 2.4 2.7 2.6 3.3 3.8 3.2

Interest Coverage 1.8 1.8 2.4 2.1 1.6 1.7




February 14, 2012 11

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

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Disclosure of Interest Statement Simplex Infra

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%)

Simplex Infrastructures Result Updated

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