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1 Dis Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jun-15 Q4FY15 Result Review (Wholly owned subsidiary of Bank of Baroda) BUY Kridhan Infra Ltd. Bitter quarter, but on growth path; maintain BUY Kridhan Infra reported consolidated revenues of Rs.1.9bn in Q4FY15, implying 52% growth QoQ but has shown 7% decline YoY. Consolidated EBITDA/PAT is Rs.182mn/ Rs.44mn and margins stood at 9.6%/ 2.5% respectively. Reported PAT for FY15 is Rs. 250mn vs Rs.352mn in FY14 which is 26% decline (YoY) led by increase in depreciation by ~30% (YoY) due to asset addition from PSL Engineering acquisition. Revenues dropped by 7.2%: The company has posted weak numbers in Q4FY15. It s revenues comes to Rs. 1.9bn showing de-growth of 7.2% vs Rs.2.0bn in Q4FY14. We expect revenue to grow at a 20% CAGR over FY15- FY18E led by existing order book of Rs.5.7bn, growing opportunities in India due to expected growth in Infrastructure and expansion in new geographies like Myanmar & Laos. EBITDA margin contracted by 127bps: Kridhan reported EBITDA of Rs.182mn / Rs.222mn in Q4FY15/Q4FY14 respectively which is shown shrinkage of EBITDA margin by ~127bps. EBITDA margin stood at 9.6% vs 10.9%/23.9% YoY/QoQ respectively. Reported PAT stood at Rs.44mn: PAT stood at Rs.44mn which decline by ~57% / ~61% YoY/QoQ respectively led by increase in operation expenses and decline in other income. 30 th June, 2015 Sector: Iron & Steel Products Price Price Target Up/Down (%) Rs. 86 Rs % Bloomberg Code Reuters Code KRID IN KRID.BO Share Holding (%) As on March 15 Promoters 64.9 FII 1.0 Others 34.2 Stock Data Nifty 8,318 Sensex 27, week high/low 106/51 Maket Cap (Rs. Bn) 5.2 Price performance (%) 1M 3M 6M 1Y Absolute Relative to Sensex Stable order book in the first year of operation in India: The Company won the order book of ~850mn for Foundation Engineering in India. Currently Kridhan has four major projects in India (Piling work at steel complex in Maharashtra and ITC Food Factory from Tata Projects, River Gomati at Lucknow, UP and Metro Project in Noida). It s current order backlog is Rs.5.7 bn, out of which Singapore contributes 67% and balance 33% is India s contribution. It expects order inflow of ~ Rs.500 to 1000 mn from S E Asia other than Singapore. Relative Performance Valuation: At CMP of Rs. 86, Kridhan Infra is trading at PE of 16x/ 10.6x in FY16E / FY17E respectively. We expect revenue/earnings to grow at 20%/ 36% during FY15-18E respectively led by increase in order book on account of potential growth in infrastructure sector due to Make in India campaign and expansion in new markets. We maintain our BUY rating with a price target of Rs. 126 (at PE of 11x and EPS of 11.4x of FY18E). 50 Source:-Bloomberg BSE Sensex Kridhan Infra Exhibit 1: Financial summary (Rs mn) Y/E March FY13 FY14 FY15 FY16E FY17E FY18E Net Sales 4,692 6,799 6,517 7,465 9,055 11,233 EBITDA EBITDA margin (%) PAT Adj. PAT EPS BV ROCE (%) ROE (%) P/E (x) EV/Sales (x) EV/EBITDA (x) e Padmaja Ambekar padmaja.ambekar@bobcaps.in

2 Exhibit 2: Q4FY15 Financial Results (Rs Mn) Q4FY15 Q4FY14 YoY (%) Q3FY15 QoQ YoY FY15A FY14 (%) (%) Net Sales 1,895 2, , ,517 6, Raw material consumed 1,603 1, ,419 5, (%) of net sales Staff cost (%) of net sales Other Expenses (%) of net sales EBITDA EBITDA Margin Depreciation EBIT Interest Other Income PBT Less: Taxation Tax / PBT Recurring PAT Exceptional items Less: Minority Interest Reported PAT NPM (%) Exhibit 3: Consolidated revenue break-up FY15 As per business As per geography Foundation Engineering, 550.1, 84% Steel Solutions, 50.4, 8% Singapore, 546.8, 84% India - Steel, 50.4, 8% India - FE, 3.4, 0% Trading, 51.2, 8% Others, 51.2, 8% Exhibit 4: Current order book of Rs.5.7bn As per business As per geography Steel Solutions 18% Singapore 67% India 33% Singapore 67% India 15% Equity research 2

3 Annual performance FY15: The company s performance is at below par. It s revenue for FY15 is Rs.6517mn showing decline of ~4.1% led by consolidation in Singapore construction industry and foreign currency impact. PAT stood at Rs.291mn vs Rs.400mn previous year showing 27.4% decline. Depreciation increased by ~29.8% due to full year impact of assets addition from PSL Engineering acquisition. The Company has enjoyed low tax rate on account of PIC Credit available in Singapore under Production Enhancement Scheme. However, the bottom line has impacted by increase in depreciation and interest cost. The Company believes their strategy to expand in new geographies like India, Myanmar & Laos will provide fruitful outcome at top line going forward. Stable order book in the first year of operation in India: The Company won the order book of ~850mn for Foundation Engineering in India. Currently Kridhan has four major projects in India (Piling work at steel complex in Maharashtra and ITC Food Factory from Tata Projects, River Gomati at Lucknow, UP and Metro Project in Noida). The company expects to win more orders from Tata Projects in port expansion & power plant construction. It s current order backlog is Rs.5700 mn, out of which Singapore contributes 67% at overseas Foundation Engineering business and balance 33% is India s contribution (15% by Foundation engineering and 18% steel solutions related business). It expects order inflow of ~ Rs.500 to 1000 mn from S E Asia other than Singapore. The Company has achieved 20% on gross margins on ongoing projects in India s foundation and engineering business and blended margin for the entire order book is 12%. Growth strategy to ensure the right path towards evolution: The management has consciously shifted their focus to India due to saturation in Singapore construction market. It expects only 5-10% growth in Singapore & eyeing more opportunities in India due to Indian Govt s focus on developing Infrastructure, railways including mass rapid transport system, and Ports. Government is aiming to develop metros across the cities which will give more scope to Kridhan to perform well in their specialized services. The company s strategy is to enter new emerging markets, to capitalize technological tie ups and to enhance company s landscape through acquisitions. The management has indicated Rs500mn capex over next two years. Equity research 3

4 Financials Exhibit 5: Income Statement Y/E Mar (Rsmn) FY13 FY14 FY15 FY16E FY17E FY18E Net sales 4,692 6,799 6,517 7,465 9,055 11,233 Operating other income Total income 4,798 6,863 6,583 7,533 9,126 11,308 Expenditure 4,156 6,059 5,844 6,674 8,048 9,973 EBITDA ,078 1,336 Change (%) EBITDA margin (%) Depreciation PBT Tax Effective rate (%) PAT Growth yoy (%) % of Net Sales Minority interest PAT after MI Change (%) Exhibit 6: Balance Sheet Y/E Mar (Rsmn) FY13 FY14 FY15 FY16E FY17E FY18E Sources of funds Share Capital Reserves 629 1,128 1,394 1,626 2,100 2,795 Net worth 746 1,292 1,568 1,762 2,235 2,931 Net deferred tax Loans 1,130 1,166 1,518 1,518 1,518 1,518 Capital employed 1,997 2,632 3,231 3,456 3,961 4,688 Application of funds Net Fixed Assets 1,236 1,689 1,930 2,112 2,228 2,163 Curr.Assets, L & adv. 1,969 3,221 3,209 3,492 4,214 5,439 Inventory Sundry Debtors 457 1, ,030 1,278 Cash & Bank Balances ,263 Loans & advances Current Liab. & Prov. 1,274 2,720 2,186 2,424 2,758 3,190 Current liabilities 1,146 2,667 2,042 2,265 2,584 2,998 Sundry Creditors ,019 1,163 1,402 1,737 Other Liabilities 768 1,811 1,023 1,103 1,182 1,261 Provisions Net Current Assets ,023 1,068 1,456 2,249 Application of Funds 1,997 2,646 3,231 3,456 3,961 4,688 e Equity research 4

5 Exhibit 7: Cash Flow Statement Y/E Mar (Rsmn) FY13 FY14 FY15 FY16E FY17E FY18E OP/(loss) before Interest & tax Depreciation & amort Direct taxes paid (Inc)/dec in wkg. capital CF from op. activity 610 1, ,208 Extra-ordinary items CF after EO Items 610 1, ,208 (Inc)/dec in FA+CWIP -1, CF from inv. activity -1, Inc/(dec) in debt Interest paid Others CF from fin. activity Inc/(dec) in cash Add: beginning balance Closing balance ,263 Exhibit 8: Ratio Analysis Y/E Mar FY13 FY14 FY15 FY16E FY17E FY18E Per share data (Rs) EPS Cash EPS Book Value per share DPS Profitability ratios (%) RoE RoCE RoIC Valuation ratios (x) P/E (diluted) Cash P/E EV/EBITDA EV/sales Price to book value Dividend yield (%) e Equity research 5

6 Sales and Dealing Team Purvesh Shelatkar Senior Vice President & Head Equity Anil Pawar Senior Manager Dealing Sachin Sambare Manager Dealing /33 Ashwin Patil Executive Dealing Research Team Sectors Vaishali Parkar Kumar Analyst Agri, Auto, Defence Padmaja Ambekar Analyst Auto Ancillary, Infra, Midcap Akanksha Tripathi Analyst Footwear, FMCG Rishabh Mehta Associate Retail Dealing Team Kshitij Kelkar Kiran Sawardekar Mohan Shinde Debt Dealing Team Minaxi Tiwari UTI Tower, 3rd Floor, South Wing, Bandra-Kurla Complex, Bandra (E), Mumbai India. Ph.: Fax: research@bobcaps.in Web: Disclaimer BUY. We expect the stock to deliver >15% absolute returns. HOLD. We expect the stock to deliver 5-15% absolute returns. SELL. We expect the stock to deliver <5% absolute returns. Not Rated (NR). We have no investment opinion on the stock. 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