BUY CMP 408.40 Target Price 460.00 SIMPLEX INFRASTRUCTURES LIMITED Result Update (PARENT BASIS): Q3 FY15 FEBRUARY 28 th 2015 ISIN: INE059B01024 Index Details Stock Data Sector Construction & Engineering BSE Code 523838 Face Value 2.00 52wk. High / Low (Rs.) 443.60/90.25 Volume (2wk. Avg. Q.) 212000 Market Cap (Rs. in mn.) 20277.06 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 55129.80 55928.18 60402.44 EBITDA 5553.30 6175.50 6757.01 Net Profit 605.80 589.46 661.71 EPS 12.20 11.87 13.33 P/E 33.47 34.40 30.64 Shareholding Pattern (%) 1 Year Comparative Graph SIMPLEX INFRASTRUCTURES LTD BSE SENSEX SYNOPSIS Simplex Infrastructures Ltd is the largest pure play civil construction & engineering contractors in India, with more than nine decades of successful operations and completion of over 2700 projects in India and abroad. In Q3 FY15, net profit was Rs. 147.60 million against Rs. 151.70 million in the corresponding quarter of the previous year. During the Q3 FY15, Net Sales stands at Rs. 14357.30 million against Rs. 13920.10 million in the same quarter last year. During the quarter operating profit is Rs. 1561.60 million as against Rs. 1404.30 million in the corresponding period of the previous year, grew by 11.20%. Profit before tax (PBT) stood at Rs. 235.10 million in Q3 FY15 compared to Rs. 199.20 million in Q3 FY14. The order book as on 31 st Dec14 stands at Rs. 168100.00 million excluding the LI of Rs. 6960.00 million. The new order intake during the quarter was Rs. 18140.00 million and the cumulative for nine months is Rs. 56280.00 million. Operating Profit and PAT of the company are expected to grow at a CAGR of 10% and 3% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Simplex Infrastructures Ltd. 408.40 20277.06 12.20 33.47 1.45 25.00 Jindal Saw Ltd. 75.60 20882.50 0.00 0.00 0.59 50.00 Larsen & Toubro Ltd. 1680.05 1561710.70 59.55 28.21 4.14 712.50 NCC Limited 76.35 42445.40 0.09 848.33 1.26 10.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q3 FY15 Rs. In million Dec-14 Dec-13 % Change Net Sales 14357.30 13920.10 3.1 PAT 147.60 151.70 (2.70) EPS 2.97 3.06 (2.70) EBITDA 1561.60 1404.30 11.20 The company has achieved a turnover of Rs. 14357.30 million for the 3 rd quarter of the financial year 2014-15 as against Rs. 13920.10 million in the corresponding quarter of the previous year. EBITDA of Rs. 1561.60 million in Q3 FY15 and increase of 11.20% against the corresponding period of last year. In Q3 FY15, net profit of Rs. 147.60 million against Rs. 151.70 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 2.97 for the 3 rd quarter as against an EPS of Rs. 3.06 in the corresponding quarter of the previous year. Break up of Expenditure (Rs. In millions) Break up of Expenditure Q3 FY15 Q3 FY14 % Change Construction Materials Consumed 4777.40 5253.60-9% Employees Benefit Expenses 1206.10 1153.10 5% Sub-contractors charges 3716.80 3342.20 11% Tools Written Off 156.40 175.20-11% Depreciation and Amortisation Expense 359.20 341.30 5% Other Expenditure 2798.00 2649.90 6%
Segment Revenue Segment Wise Revenue (Values in Million) Q3 FY15 Q3 FY14 CHNG % Construction 14225.40 13842.80 3% Others 131.90 77.30 71% COMPANY PROFILE Simplex Infrastructures Ltd. is a diversified company established in 1924 and executing projects in several sectors like Transport, Energy & Power, Mining, Buildings, Marine, Real Estate etc. Simplex is one of the construction leaders in India for nearly 90 years executing projects with consistent quality assurance, cost control and adherence to milestones in a safe environment as per the customer requirements. It promotes the culture of sharing rich and varied experience with staff members, as also with clients and thereby benefits and helps the growth of the construction fraternity and society at large. The Company has been closely associated with the country s infrastructure building with over 2700 completed projects spanning almost all the gamut of construction industry. Simplex established its first overseas office in Sri Lanka in 1980 and has since enlarged its global footprint to execute construction projects in Africa, West Asia, CIS countries and SAARC countries. It has overseas branches in Sri Lanka, Bangladesh, Oman, Qatar, Bahrain, Saudi Arabia, Ethiopia and Dubai. International projects currently account for about 16% of the turnover. The company s overseas projects range from hotels, residential and commercial buildings to flyovers, power plants, marine works, sports complex and de-watering plants. Simplex Infrastructures Ltd. has built international hotels in Tashkent, Uzbekistan and Qatar; factories, waterworks and power utilities in West Asia and Africa, and a number of buildings and flyovers. It is particularly strong in the Middle East and scheduled to play a significant role in the construction efforts for the region. For nearly 100 years, Simplex Infrastructures has ranked among the top infrastructure builders in India. Today, across sectors, it is often the first choice when it comes to meeting difficult engineering challenges.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2013-2016E I. EQUITY AND LIABILITIES: A. Shareholders Funds FY13A FY14A FY15E FY16E a) Share Capital 99.30 99.30 99.30 99.30 b) Reserves and Surplus 12741.10 13878.60 14468.06 15129.76 Sub-Total-Net worth 12840.40 13977.90 14567.36 15229.06 B. Non-Current Liabilities: a) Long-term borrowings 2768.40 3769.70 4862.91 5349.20 b) Deferred Tax Liabilities [Net] 2049.10 2073.30 2102.33 2123.35 c) Other Long Term Liabilities 96.30 91.70 93.53 95.40 d) Long Term Provisions 83.70 89.00 96.12 100.93 Sub-Total-Long term liabilities 4997.50 6023.70 7154.89 7668.88 C. Current Liabilities: a) Short-term borrowings 23788.00 25304.70 27076.03 28429.83 b) Trade Payables 16026.50 17441.90 17093.06 17434.92 c) Other Current Liabilities 12979.70 10014.30 11115.87 11671.67 d) Short Term Provisions 99.90 104.00 62.40 69.89 Sub-Total-Current Liabilities 52894.10 52864.90 55347.36 57606.31 TOTAL-EQUITY AND LIABILITIES (A+B+C) 70732.00 72866.50 77069.61 80504.26 II. ASSETS: D. Non-Current Assets: Fixed Assets Tangible Assets 12175.00 11615.70 11848.01 12203.45 Intangible Assets 35.10 22.50 22.95 23.64 Capital Work-in-Progress 175.20 531.10 626.70 720.70 a) Sub Total - Fixed Assets 12385.30 12169.30 12497.66 12947.80 b) Other non-current Assets 1447.50 1097.50 899.95 791.96 c) Non Current Investments 1085.70 1146.40 1203.72 1251.87 d) Long Term Loans and Advances 303.60 363.00 348.48 365.90 Sub-Total-Non-Current Assets 15222.10 14776.20 14949.81 15357.52 E. Current Assets: a) Current Investments 183.20 194.10 199.92 207.92 b) Inventories 7849.40 8618.90 9480.79 10239.25 c) Trade Receivables 22743.40 20951.00 21160.51 21795.33 d) Cash and Bank Balances 719.80 807.00 823.14 864.30 e) Short Term Loans and Advances 7415.60 7225.70 7514.73 7815.32 f) Other Current Assets 16598.50 20293.60 22940.71 24224.62 Sub-Total-Current Assets 55509.90 58090.30 62119.80 65146.73 TOTAL-ASSETS (D+E) 70732.00 72866.50 77069.61 80504.26
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 58208.10 55129.80 55928.18 60402.44 Other Income 419.60 394.00 334.30 354.35 Total Income 58627.70 55523.80 56262.48 60756.79 Expenditure -53527.20-49970.50-50086.98-53999.78 Operating Profit 5100.50 5553.30 6175.50 6757.01 Interest -2893.70-3341.70-3802.82-4259.16 Gross profit 2206.80 2211.60 2372.68 2497.86 Depreciation -1303.60-1355.60-1445.28-1517.55 Profit Before Tax 903.20 856.00 927.40 980.31 Tax -305.00-250.20-337.94-318.60 Net Profit 598.20 605.80 589.46 661.71 Equity capital 99.30 99.30 99.30 99.30 Reserves 12741.10 13878.60 14468.06 15129.76 Face value 2.00 2.00 2.00 2.00 EPS 12.05 12.20 11.87 13.33 Quarterly Profit & Loss Statement for the period of 30 th June, 2014 to 31 st Mar, 2015E Value(Rs.in.mn) 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15E Description 3m 3m 3m 3m Net sales 13474.00 12591.00 14357.30 15505.88 Other income 111.30 111.80 52.70 58.50 Total Income 13585.30 12702.80 14410.00 15564.38 Expenditure -12122.80-11207.00-12848.40-13908.78 Operating profit 1462.50 1495.80 1561.60 1655.60 Interest -909.90-929.30-967.30-996.32 Gross profit 552.60 566.50 594.30 659.28 Depreciation -352.30-367.40-359.20-366.38 Profit Before Tax 200.30 199.10 235.10 292.90 Tax -73.30-71.70-87.50-105.44 Net Profit 127.00 127.40 147.60 187.46 Equity capital 99.30 99.30 99.30 99.30 Face value 2.00 2.00 2.00 2.00 EPS 2.56 2.57 2.97 3.78
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 12.05 12.20 11.87 13.33 EBITDA Margin (%) 8.76% 10.07% 11.04% 11.19% PBT Margin (%) 1.55% 1.55% 1.66% 1.62% PAT Margin (%) 1.03% 1.10% 1.05% 1.10% P/E Ratio (x) 33.90 33.47 34.40 30.64 ROE (%) 4.66% 4.33% 4.05% 4.35% ROCE (%) 16.26% 16.05% 16.39% 16.88% Debt Equity Ratio 2.07 2.08 2.19 2.22 EV/EBITDA (x) 9.01 8.71 8.29 7.84 Book Value (Rs.) 258.62 281.53 293.40 306.73 P/BV 1.58 1.45 1.39 1.33 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 408.40, the stock P/E ratio is at 34.40 x FY15E and 30.64 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.11.87 and Rs.13.33 respectively. Operating Profit and PAT of the company are expected to grow at a CAGR of 10% and 3% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 8.29 x for FY15E and 7.84 x for FY16E. Price to Book Value of the stock is expected to be at 1.39 x and 1.33 x respectively for FY15E and FY16E. We recommend BUY in this particular scrip with a target price of Rs.460.00 for Medium to Long term investment. INDUSTRY OVERVIEW The Indian construction market is expected to be the world's third largest by 2020. The market is expected to more than double to US$ 649.5 billion by 2020 from US$ 360 billion in 2010. It is currently the fourth-largest sector in the country in terms of foreign direct investment (FDI) inflows. FDI in the sector is estimated to grow to US$ 25 billion in 10 years. Real estate contributed about 6.3 per cent to India's gross domestic product (GDP) in 2013. The market size of the sector is expected to increase at a compound annual growth rate (CAGR) of 11.2 per cent during FY 2008-2020 to touch US$ 180 billion by 2020. The Government of India has allocated US$ 1.3 billion for Rural Housing Fund in the Union Budget 2014-15. It also allocated US$ 0.7 billion for National Housing Bank (NHB) to increase the flow of cheaper credit for affordable housing for urban poor. The government has allowed FDI of up to 100 per cent in development projects for townships and settlements. The entry of major private players in the education sector has created vast opportunities for the real estate sector. Emergence of nuclear families and growing urbanisation have given rise to several townships that are developed to take care of the elderly. A number of senior citizen housing projects have been planned, and the segment is expected to grow significantly in future. Growth in the number of tourists has resulted in demand for service apartments. This demand is likely to be on the uptrend and presents opportunities for the unorganised sector.
Outlook As the Indian economy grows, the real estate sector keeps benefiting. With the increase in foreign tourist arrivals (FTA) every year, there is demand for real estate in the tourism and hospitality sector. Also, with the entry of major private players in the education sector, the major cities, that is Hyderabad, Bengaluru, Mumbai, Delhi, Pune, Chennai and Kolkata are likely to account for 70 per cent of total demand for real estate in the education sector. Demand for improved healthcare facilities is also expected to provide a boost to the construction sector in the country. Disclaimer: This document is prepared by our research analysts and it 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 we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its 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. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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