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SIMPLEX INFRASTRUCTURES LTD Result Update: Q4 FY 11 C.M.P : Rs.280.00 Target Price : Rs.316.00 Date : 14 th July 2011 BUY Stock Data: Sector: Face Value Rs. Infrastructure Rs.2.00 52 wk. High/Low (Rs.

00 Share Holding Pattern 1 Year Comparative Graph Simplex Infrastructure Ltd BSE SENSEX SYNOPSIS Simplex Infrastructures Ltd (SIL) is one of the oldest construction companies in India with well

1 SIMPLEX INFRASTRUCTURES LTD Result Update: Q4 FY 11 C.M.P : Rs Target Price : Rs Date : 14 th July 2011 BUY Stock Data: Sector: Face Value Rs. Infrastructure Rs wk. High/Low (Rs.) / Volume (2 wk. Avg.) BSE Code Market Cap (Rs.In mn) Share Holding Pattern 1 Year Comparative Graph Simplex Infrastructure Ltd BSE SENSEX SYNOPSIS Simplex Infrastructures Ltd (SIL) is one of the oldest construction companies in India with well diversified project expertise. Simplex infrastructure has been issued a letter of award (LoA) by Bengal Aerotropolis Projects (BAPL), which is presently setting up the country's first airport city near Durgapur, West Bengal. Net profit of the company has increased at 1% yoy Rs mn from Rs mn of same period of last year. Simplex has successfully completed major projects such as Refinary & Petrochemical complex at Jamnagar, Cement Plant at Cuddappah and Mejia. Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 6% over 2010 to 2013E respectively. Years Net sales EBITDA Net Profit EPS P/E FY FY 12E FY 13E

2 Peer Group Comparison Name of the company CMP(Rs.) Market Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%) SIMPLEX INFRA IVRCL NCC HCC Investment Highlights Q4 FY11 Results Update Simplex Infrastructure Ltd disclosed results for the quarter ended March Net sales for the quarter moved up 9% to Rs million as compared to Rs million during the corresponding quarter last year. During the quarter, the company has reported PAT decreased to Rs million from Rs million in previous year same quarter. The Basic EPS of the company stood at Rs.7.45 for the quarter ended March Quarterly Results - Standalone (Rs in mn) As At March-11 March-10 %change Net sales PAT (19) Basic EPS (19) 2

3 Basic EPS of the company stood at Rs

4 Break up of Expenditure Expenditure for the quarter stood at Rs mn, which is around 9% higher than the corresponding period of the previous year. Consumption of Raw Material cost of the company for the quarter accounts for 42% of the sales of the company and stood at Rs mn from Rs mn of the corresponding period of the previous year. Other Expenses cost increased 21%YoY to Rs mn from Rs mn and accounts for 17% of the revenue of the company for the quarter. OPM and NPM for the quarter stood at 11% and 3% respectively from 11% and 4% respectively of the same period of the last year. 4

5 FY11 Performance Net profit of the company has increased at 1% yoy Rs mn from Rs mn of same period of last year. Total revenue for the year stood at Rs mn from Rs which is 7% increased than that of a year ago. EPS for the year stood at Rs per equity share of Rs.2.00 each. Operating profit of the company stood at Rs mn. OPM for the year stood at 10.23%. Expenditure of the company increased 7% YoY to Rs mn. Interest expenses for the year stood at Rs mn. Board recommends Dividend Simplex Infrastructures Ltd has recommended dividend of Rs. 2/- per Equity Share of face value of Rs. 2/- each for the year ended March 31,

6 Company Profile Simplex Infrastructure Ltd (SIL) is one of the oldest players in infrastructure industry and it is one of the top-five infrastructure solutions providers in the country with a proven track record of 80 years. It has executed over 2100 projects in India and abroad; it has worked on an equal footing with major international construction companies in mega-sized projects. Traditionally the company s focus was on pilling and now emerged as an infrastructure solution provider. Business areas The company currently engaged in the following business areas 1. Ground engineering 2. Power 3. Industrial construction 4. Urban utilities 5. Building& 6. Housing 7. Roads 8. Marine 6

7 1. Ground engineering Ground engineering encompasses activities related to foundation engineering a thorough understanding of various soil types, their load-bearing capacity and the specialized alteration required to enable the soil to withstand pressure for years to come. Having been present in this space since inception in 1924, mastery of this space enabled Simplex to forward-integrate to provide services across civil and structural engineering and end-to-end infrastructure solutions. Till date Simplex Infrastructure has installed over two million piles. 2. Power Simplex is present in the hydel, thermal (coal, gas) and nuclear power plant segment. The Company is into thermal (coal and gas), nuclear, and hydro power plants and is associated with more than 80% of all thermal power plants in India. Simplex holds a record in the installation of the largest number of turbo generator foundations ranging from 10 MW to 500 MW. 3. Industrial construction Simplex offers an entire gamut of heavy industrial construction in civil and structural engineering for the following industries: Iron and steel, aluminium, cement, paper, fertiliser, textile, chemical, refineries, petrochemical and other Industries.It possesses latest expertise in construction of high-rise RCC silos and tapered / cylindrical chimneys with a height of 220 mts and wall thickness of up to 600 mm, cooling towers, water and effluent treatment plants for industries such as cement, paper, fertilisers and power stations. 7

8 4. Urban utilities Simplex undertakes construction of water, waste and sewerage treatment plants, pipelines and metro rail With scale and integration being representative of a large number of infrastructure projects in the country, developers and builders alike are turning to infrastructure providers who can manage the entire lifecycle of a project. 5. Building and housing Simplex has completed prestigious projects where the demand was for top class construction quality and speedy construction, including the construction of the first 17th Storied RCC framed building in South East Asia at Kolkata.In collaboration with Aardings, Holland, the Company has introduced a super-fast construction technology in India, which executes building projects with amazing speed. The technology can be adapted for buildings of different shapes and sizes of multi-storied offices and residential complexes, hotels and hospitals, row houses etc. 6. Road, railways and bridges It has been associated with projects under GQ and NSEW corridors. Simplex was awarded the 72-km stretch at Ongole in Andhra Pradesh, a project commissioned by the National Highway Authority of India. It has built bridges over rivers and has expertise in RCC pre-stressed concrete bridges. It forayed into the railways sector in 2006 with projects involving the construction of related buildings, bridges and platforms.12.5 Km elevated Expressway at Hyderabad. 8

9 7. Marine Simplex enhanced its focus and evolved marine constructions into one of its primary divisions as a clear extension of the Company s core competence in land piling into piling under water Today it is associated with most of the major marine projects in the country. Its area of operation includes the design and construction of offshore structures like ports, harbors, jetties, wharfs, quays, berths, dry docks, wet basin, mooring and berthing dolphin sand breakwater etc. Simplex Infrastructure has tie-ups with technocrats, consultants, architects and engineers in public and private domains. The company enjoys an enviable industry standing on account of its quality assurance, project monitoring, credible time management, adherence to milestones and problem management. Over decades, Simplex Infra has worked closely with government undertakings across a number of Indian states. As a result, its clientele today comprises public works, railways, electricity boards and health departments. The company has been registered for engineering works of unrestricted value with most Indian government departments as well as the private sector. Simplex Infrastructure owns the largest number of piling rigs outside USA. Simplex Infrastructure owns the largest number of hydraulic drilling rig in India. The company owns large capacity concrete pumps and placer boom suitable for high rise structure upto 250 mtr. It owns a footstep piling rig, the first of its kinds in India 9

10 Financial Results 12 Months Ended Profit & Loss Account (Standalone) Value(Rs.in million) FY10A FY11A FY12E FY13E 12m 12m 12m 12m Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Profit after Tax Equity Capital Reserves Face Value(Rs.) EPS *A=Actual, *E=Estimated 10

11 Quarterly Ended Profit & Loss Account (Standalone) Value(Rs.in million) 30-Sep Dec Mar Jun-11 3m(A) 3m(A) 3m(A) 3m(E) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Profit after Tax Equity Capital Face Value(Rs.) EPS *A=Actual, *E=Estimated 11

12 Key Ratio Particulars FY10 FY11 FY12E FY13E EPS (Rs.) EBITDA Margin (%) 10.23% 10.23% 10.15% 10.06% PAT Margin (%) 2.75% 2.59% 2.60% 2.66% P/E Ratio (x) ROE (%) 12.64% 11.44% 11.05% 10.86% ROCE (%) 13.30% 13.34% 13.35% 13.31% EV/EBITDA (x) Debt-Equity Ratio Book Value (Rs.) P/BV Charts: 12

13 13

14 14

15 Outlook and Conclusion At the current market price of Rs the stock is trading at x FY12E and 9.41 x FY13E respectively. Price to Book Value of the stock is expected to be at 1.15 x and 1.02 x respectively for FY12E and FY13E. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs and Rs respectively. Net profit of the company has increased at 1% yoy Rs mn from Rs mn of same period of last year. Simplex has successfully completed major projects such as Refinary & Petrochemical complex at Jamnagar, Cement Plant at Cuddappah and Mejia. Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 6% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 2.66 x for FY12E and 2.49 x for FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. 15

16 Industry Overview The Indian economy is at critical juncture of its development process. India is amongst the fastest growing global economies expected to be the eighth largest economy globally by 2010 and fourth largest by Hence, India in its quest for growth has embarked on massive infrastructure and construction projects to support the growth. Increasing infrastructure activity, booming construction and a flourishing economy in India brings with it signs of robust demand. Globally, the focus on cost cutting and value-for-money sourcing will provide big opportunities to Indian companies to establish a strong foothold. Construction Construction Industry is witnessing a boom in view of the significant economic activity in all sectors of the economy; It has emerged as one of the dynamic sector in India's economy with a growth of more than 10% per annum over the last few years. In India, construction is the second largest economic activity after agriculture. Investments in construction accounts for nearly 11 per cent of India's Gross Domestic Product (GDP) and nearly 50 per cent of its Gross Fixed Capital Formation (GFCF). Fund injection into the sector could go up to US$ billion by FY Construction accounts for nearly 65 per cent of the total investment in infrastructure and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years. This sector has recorded the highest growth rate in generation of jobs in the Country. Construction activity is an integral part of a country's infrastructure and industrial development. Construction is a vehicle for the growth of civilization. It builds structures that sustain a nation's economy. In India's national plans construction constitutes 40% to 50% of the capital expenditure on projects in various sectors such as energy, transport, irrigation, communications, defence, the social sector, rural and urban infrastructure, etc The construction sector is an important sector due to the labour intensive nature of the construction activity and the priority being given to 16

17 employment generation in the economy. The existence and development of adequate infrastructure is an essential requirement for sustaining the growth momentum and to ensure required growth rate. With the rapid growth of the economy in recent years, the importance and urgency of removing infrastructure constraints have increased. The existence and development of adequate infrastructure is an essential requirement for sustaining the growth momentum and to ensure required growth rate. With the rapid growth of the economy in recent years, the importance and urgency of removing infrastructure constraints have increased. Traditionally, power, roads, railways, ports, airports and telecommunications were the exclusive domain of the government. Infrastructure investment requires huge initial capital outlay, which was considered to be a big hurdle in the past due to prohibition or lesser private participation on infrastructure projects. Even in the present situation it is not possible on the part of the Government to provide the infrastructure on its own and is under the pressure of rising gaps between demand and supply of infrastructure. Consequently, the government is encouraging more private sector participation through Public Private Partnership (PPPs) concept, which is fast evolving in all the aspects of infrastructure development. Involvement of private investments not only suffice funding requirement of the projects but it has also other advantages like improvement in competitiveness of the projects, more efficient execution, better offerings, etc. Out of the total outlay on infrastructure sector during 11th five year plan, government expects 29.7% of total outlay to come from private participation and balance (79.1%) through public funding. The government has shown greater commitment to accelerate the infrastructure development as indicated by its plans to raise infrastructure spending during 11th five year plan. According to 11th five year plan, investment in infrastructure sector is likely to increase to around 8% of GDP compared to 4.6% in 10th plan period. It is estimated that infrastructure spending of around Rs 23,850 billion is planned during the 11th Plan period. The total spending on infrastructure during 11th five year plan 17

18 is almost 2.7 times bigger than anticipated spending on infrastructures during 10th five year plan. This spending is planned across the segments, with power likely to see the maximum spending of 30.4% of total outlay during 11th five year plan. Other sectors to see major outlay of total infrastructure spending are roads, railways and telecom with total infrastructure outlay of 15.4%, 12.7%, 13.2% respectively. Roads Indian road network, forms 15% of India's Infrastructure investment in the 11th plan and is also one of the busiest road networks in the world. While India has one of the longest road system in the world, only a very small fraction of this is comparable to world standard in terms of width and quality. About 65% of freight and 87% of passenger traffic is carried by roads in India. Traffic on Indian roads has been increasing by 7-10% per annum which has led to about 25-30% of national and state highways being heavily congested with truck speeds of around km/hr. India's road network has witnessed rapid traffic growth, which has far outstripped the capacity increase of the road network. The government has successfully experimented participation of private sector in road development and expects the share of private investments to go up from 5% in 10th plan to 36% in 11th plan. Driven by the initiatives of National Highways Authority of India (NHAI) as well as the state bodies, the 11th plan is expected to generate investments of Rs 3,14,200 crore into the roads sector, representing an increase of more than 110% over the corresponding investment in the 10th plan. The 11th plan focuses on harnessing investments from the private sector, with such investments set to increase by more than 14% over the corresponding 10th plan investments. Currently, 60 NHAI road projects are under implementation by private developers. On the other hand, contribution from the Central and State sectors is expected to grow by just over 50%. 18

19 Railways Indian Railways has been the prime mover of the nation and has the distinction of being the largest railway system in Asia and the second largest railway system in the world under single management. Recognizing the need for substantial financial and managerial capital, the Railways have been actively seeking and encouraging increased private sector participation. Railways are targeting Rs 1,20,000 crore of public-private partnership (PPP) investment and will be focused on the modernization of metro rail stations, logistics, parks and container depots, the establishment of manufacturing facilities for modern rolling stock and dedicated freight and high-speed passenger corridors. Real estate The Indian real estate sector plays a significant role in the country's economy. Almost 5% of the country's GDP is contributed to by the housing sector. In the next five years, this contribution to the GDP is expected to rise to 6%. According to industry players, housing accounts for 4.5% of gross domestic product (GDP) with urban housing accounting for 3.13%.It has also been suggested that India's property sector could begin to improve from late 2009 and may attract up to US$ billion in real estate investment over a five-year period. The Indian real estate market is worth around US$ billion and can be segregated into residential, commercial and the retail and hospitality segments. The residential sector forms 90-95% of the Indian reality space, while commercial segment forms 4-5% and organised retail around 1 %. The IT and ITES sector alone is estimated to require 150 million sq ft of office space across urban India by The organized retail industry is likely to require an additional 220 million sq ft by Moreover, growth is not restricted to a few towns and cities but is pan-india, covering nearly all tier-l and tier-ll cities Investments in commercial real estate are likely to increase three-fold in five years over the previous five years. According to the Tenth Five-Year-Plan, there is a shortage of 22.4 million dwelling units. Thus, over the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be 19

20 constructed with a majority of them catering to middle and lower-income groups. Urban housing is expected to grow at a CAGR of 14% and is expected to reach US$ 97.5 billion by Indian Power Sector: The Indian Power Sector has been bogged down by several chronic problems for long, such as lower-than-targeted capacity addition in various five-year plans, a low Plant Load Factor (PLF), high AT&C losses, woes over the financial viability of State Electricity Boards (SEBs), a high base and peak load deficits. Notably, the base power deficit has inched upwards over the years, to around 11.0% in FY2009, with the peak load deficit also hovering at around 12.0% levels.the government, after taking cognisance of the fact that the acute power shortage in India could turn out to be one of the biggest obstacles in our growth story, has been taking several initiatives to turn around the fortunes of this core sector. The Electricity Act 2003 and subsequent reforms have been undertaken to accelerate the growth of power in the country. The scale of expansion planned across the entire value-chain is unprecedented, opening up a plethora of opportunities for the players in the sector, to participate in the ongoing Power boom. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. 20

21 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods D. Ashakirankumar Automobile A. Rajesh Babu FMCG H.Lavanya Oil & Gas T.Joshna Devi Diversified Dheeraj Bhatia Diversified Manoj kotian Diversified Nimesh Gada Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO s, QIP s, F.P.O s,takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai Tel. : / / Telefax : info@firstcallindiaequity.com 21

THERMAX LTD. Result Update: Q2 FY 12. C.M.P : Rs Target Price : Rs Date : 03 rd Nov 2011 BUY

THERMAX LTD. Result Update: Q2 FY 12. C.M.P : Rs Target Price : Rs Date : 03 rd Nov 2011 BUY THERMAX LTD Result Update: Q2 FY 12 C.M.P : Rs.492.00 Target Price : Rs.556.00 Date : 03 rd Nov 2011 BUY Stock Data: Sector: Capital Goods Face Value Rs. Rs.2.00 52 wk. High/Low (Rs.) 926.90/407.05 Volume