ITD Cementation India

1QCY212 Result Update Construction May 14, 212 ITD Cementation India Performance highlights Y/E December 1QCY12 4QCY11 % chg (qoq) 1QCY11 % chg (yoy) Total operating income 384 327 17.6 344 11.5 Operating profit 49 44 11.4 27 81.3 OPM 12.8 13.5 (71)bp 7.9 492bp Adj. PAT 12 12 (3.4) 4 24.2 ITD Cementation (standalone) reported a strong set of numbers for 1QCY212. The company s revenue grew by 11.5% yoy to `384cr and its profit soared by 24% yoy to `12cr. Completion of the low-profit NH1 road projects helped the company to expand its margins. We are revising our estimates to factor in the company s 1QCY212 performance. We maintain our Buy view on the stock. Strong order book to drive revenue The company s order book stood at `3,6cr as of April 212, with government and private order ratio of 6:4. We expect the company s revenue to post a CAGR of 2% to `1,842cr, driven by strong order inflow worth `1,2cr in the first four months of CY212E as compared to `1,132cr in CY211. Interest cost reduction to drive bottom line Interest cost for the company was as high as 14.6% in CY211. However, the company expects interest rates to decline from 2HCY212. With the recent cut in repo rate by 5bp by the RBI, it is expected that interest rates will see a downward trend. We expect interest cost to decline to 14.2%, which will directly add to the company s bottom line, which is expected to be `44cr in CY213E. Outlook and valuation We expect ITD Cementation s revenue to post a CAGR of 2% to `1,842cr and profit to post a CAGR of 4% to `44cr over CY211-13E. At the CMP of `186, the stock is trading at PBV of.5x CY213E. We remain positive on the stock with a Buy view and a target price of `236 and a target PBV of.6x for CY213E. BUY CMP `186 Target Price `236 Investment Period 12 Months Stock Info Sector Construction Market Cap 215 Beta.6 52 Week High / Low 22 / 111 Avg. Daily Volume 2,386 Face Value (`) 1 BSE Sensex 16,216 Nifty 4,98 Reuters Code ITCM.BO Bloomberg Code ITCE@IN Shareholding Pattern Promoters 69.6 MF / Banks / Indian Fls 4.4 FII / NRIs / OCBs.5 Indian Public / Others 25.5 Abs. 3m 1yr 3yr Sensex (9.1) (11.6) 36.6 ITC Cementation 17. (3.) 53.8 Key financials (Standalone) Y/E Dec. CY28 CY29 CY21 CY211 CY212E CY213E Net sales 958 973 1,57 1,283 1,535 1,842 % chg 22.2 1.5 8.7 21.4 19.7 2. Adj. net profit (3) 5 9 23 31 44 % chg (141.8) 275. 72. 146.2 39.5 4.3 OPM 6.2 9.5 9.2 1.6 11.1 11.1 EPS (`) (2.6) 4.6 7.9 19.6 27.3 38.3 P/E (x) (7.6) 4.3 23.5 9.5 6.8 4.9 P/BV (x).6.6.6.6.5.5 RoE (.9) 1.5 2.6 6.1 7.9 1.2 RoCE 5.1 7.2 7.5 1. 11.8 12.8 EV/Sales (x).6.7.6.6.6.5 Tejashwini Kumari 22-393578 Ext: 6856 EV/EBITDA (x) 1.2 7.3 6.9 5.8 5.1 4.8 tejashwini.kumari@angelbroking.com Please refer to important disclosures at the end of this report 1

ITD Cementation India 1QCY212 Result Update Exhibit 1: 1QCY212 performance (Standalone) Y/E March 1QCY12 4QCY12 % chg. (qoq) 1QCY11 % chg. (yoy) CY211 CY21 % chg Total operating income 384 327 17.6 344 11.5 1,283 1,57 21.4 Net raw material 148 17 38.5 124 19.2 463 418 1.8 (% of Sales) 38.6 32.8 36.1 36.1 39.6 Employee cost 33 33.3 29 14.8 124 12 21.6 (% of Sales) 8.7 1.2 8.4 9.7 9.6 Other Expenses 153 142 7.8 164 (6.4) 56 439.65 27.3 (% of Sales) 39.9 43.5 47.6 43.6 41.6 Total expenditure 335 282 18.6 317 5.6 1,147 96 19.5 Operating profit 49 44 11.4 27 81.3 136 97 4 OPM 12.8 13.5 (71)bp 7.9 492bp 1.6 9.2 144bp Interest 27 26 2.1 2.27 31.4 92.79 78 19.3 Depreciation 8 9 (8.9) 7.17 17.5 34.24 31 11.3 Other income 2 (2) 193.3 6.8 (73.1) 12.9 24 (45.8) PBT 16 7 123.6 6 173.4 22 12 8. (% of Sales) 4.1 2.1 1.7 1.7 1.2 Tax 4 (5.36) (169.8) 1.81 16.6 (.55) 3 (119.3) (% of PBT) 23.8 (76.4) 31.5 (2.5) 23.3 Reported PAT 12 12 (3.4) 4 24.2 23 9 14.5 PATM 3.1 3.8 1.1 1.8.9 Strong order book and margin expansion boost profit The company secured orders worth `1,2cr in the first four months of CY212, which helped the company s revenue to grow by 11.5% yoy. During the quarter, the company s other expenses declined considerably as a percentage of net sales, which helped the operating margin to expand substantially by 492bp yoy. This can mainly be attributed to completion of low-margin NH1 projects. The company s profit jumped considerably by 24% yoy to `12cr mainly due to margin expansion. Exhibit 2: Revenue growth trend Exhibit 3: Expanding EBITDA margin 5 4 6 15 4 3 5 12 (`cr) 3 2 1 1QCY1 2QCY1 3QCY1 4QCY1 1QCY11 Revenue (LHS) 2QCY11 3QCY11 4QCY11 yoy growth (RHS) 1QCY12 2 1 (1) (2) (`cr) 4 3 2 1 1QCY1 2QCY1 3QCY1 4QCY1 EBITDA (LHS) 1QCY11 2QCY11 3QCY11 4QCY11 EBITDA Margin (RHS) 1QCY12 9 6 3 May 14, 212 2

ITD Cementation India 1QCY212 Result Update Investment arguments Strong order book to drive revenue The company s order book stood at `3,6cr as of April 212, with government and private order ratio of 6:4. With the completion of the low profitable NH1 projects, the current order book is more into the high-profitability segments. The company also completed civil works for Iron Ore Port Terminal at Ennore Port, Chennai and various other piling and civil works in U.P., Odisha, Gujarat and Andhra Pradesh. Exhibit 4: Order book (As of April 212) Segment % Marine and Specialist works (Piling & Foundation) 8 Roads 7 Airport and urban infrastructure project 8 Tunnels and irrigation projects 5 Total 1 The company successfully added new contracts worth `1,132cr in CY211. The major contracts were: Construction of ship repair facility at Lavgan, Maharashtra Road Project (six-laning of Pune Satara Road Phase 1), Maharashtra Construction of Terminal 12 Berth at Mundra, Gujarat Piling work at Cuddalore for 2x6MW Power Project in Tamil Nadu Construction of diaphragm wall and capping beam for proposed residential complex at Wadala, Mumbai, Maharashtra Piling work for multi-storey residential complex at Jaypee Greens, Noida The company s new order inflow in CY211 was less as compared to CY21, the major reasons being the sluggish economic environment, high interest rate and the upward trend in commodity prices. However, revenue growth outlook of the company looks healthy, as it has already bagged new orders for `1,2cr in the first four months of CY212E. We expect the company s revenue to post a CAGR of 2% over CY211-13E to `1,842cr. May 14, 212 3

ITD Cementation India 1QCY212 Result Update Exhibit 5: Strong order inflow expected in CY212 2,5 2, 1,5 1, 5 1 8 6 4 2 (2) (4) CY27 CY28 CY29 CY21 CY211 CY212* (Till April) New contracts added (LHS) yoy growth (RHS) (6) Foray into the industrial and power segments A growth driver The company recently forayed into the industrial and power segments and has already bagged orders for `3cr in the first four months of CY212 and expects the segment to be worth `5cr-6cr by the end of CY212. The recent order in the segment is from Adani Power s Dahej Project in Gujarat. The segment being a high-margin segment is expected to help the company in expanding its operating margin. Interest cost reduction to drive bottom line Interest cost for the company was as high as 14.6% in CY211. However, the company expects interest rates to decline from 2HCY212 as the company is in the process of switching some of its high interest cost loans to low interest cost loans. With the recent 5bp cut in repo rate by the RBI, it is expected that interest rates will see a downward trend. We expect the company s interest cost to decline by 14.2%, which will directly add to the company s bottom line, which is expected to be `44cr in CY213E. May 14, 212 4

ITD Cementation India 1QCY212 Result Update Financials Revenue to post a 2% CAGR over CY211 13E The company s revenue is expected to post a 2% CAGR over CY211 13E to `1,842cr on the back of strong order book of `3,6cr as of April 212, executable over a period of two and a half years. Exhibit 6: Strong order book to drive revenue 2, 25 1,6 2 1,2 8 15 1 4 5 CY28 CY29 CY21 CY211 CY212E CY213E Revenue (LHS) Revenue growth (RHS) Exhibit 7: Revenue break-up Area of operation % Contribution to revenue Marine work and Pilling & foundation 6 Hydro/ Roads/ Bridges/ Tunnels 2 Power 1 Margin expands after the completion of low-margin contracts The company s operating margin improved by 144bp in CY211 to 1.6% from 9.2% in CY21, majorly due to reducing proportion of the low-margin NH1 road projects in the order book. These projects were almost completed as of April 212, which will further lead to margin expansion. Also, with a large share of pilling and foundation projects (having a higher gross margin of 12 13% compared to other projects with a gross margin of 8 9%) in total revenue, the company s margin is expected to improve further by 49bp to 11.1% in CY212E and stabilize around this level going forward. May 14, 212 5

ITD Cementation India 1QCY212 Result Update Exhibit 8: EBITDA margin to stabilize going forward 5 4 3 2 1 (1) CY28 CY29 CY21 CY211 CY212E CY213E PAT (LHS) PAT growth (RHS) 3 25 2 15 1 5 (5) (1) (15) (2) Profit to show impressive growth The company has been reporting low profit in the past few years due to low margins and high cost of credit. However, going forward, margins are expected to improve and interest rates are expected to come down from 14.6% in CY211 to 14.2% in CY212E. Aided by these factors, we expect the company s profit to post a CAGR of 4% over CY211 13E to `44cr. Exhibit 9: PAT to post a CAGR of 4% over CY211-13E 5 4 3 2 1 (1) CY28 CY29 CY21 CY211 CY212E CY213E PAT (LHS) PAT growth (RHS) 3 25 2 15 1 5 (5) (1) (15) (2) May 14, 212 6

ITD Cementation India 1QCY212 Result Update Outlook and valuation During the first four months of CY212E, the company bagged orders worth `1,2cr, with the total order book of `3,6cr as of April 212, executable over two and half years. We expect the company s revenue to post a CAGR of 2% and profit to post a CAGR of 4% over CY211-13E to `1,842cr and `44cr, respectively. We remain positive on the stock with a Buy recommendation with a target price of `236 and a target PBV of.6x for CY213E. Exhibit 1: One-year forward PBV band 8 7 6 5 (`) 4 3 2 1 Jan-8 Jul-8 Jan-9 Aug-9 Mar-1 Sep-1 Apr-11 Oct-11 May-12 Price.2x.4x.6x.8x Competition ITD Cementation looks attractive vis-à-vis its peers with a PBV of.4x and a PE of 4.9x for CY213E. The company s earnings are expected to witness a robust CAGR of 4% over CY21 12E to `44cr. Although Patel Engineering is trading at a PBV of.4x, ITD Cementation looks better with a PE of 4.5x and RoE of 1.2% for CY213E. Simplex Infra looks costly with a higher PBV of.7x and PE of 6.2x for FY214E. Exhibit 11: Attractively valued as compared to peers Company Year end Mcap Sales OPM PAT EPS (`) RoE P/E (x) P/BV (x) EV/Sales (x) ITD Cementation CY212E 215 1,535 11.1 31 27.3 7.9 6.8.5.6 CY213E 215 1,842 11.1 44 38.3 1.2 4.9.5.5 Patel Engg. FY213E 612 3,69 13.1 98 14. 6.2 6.2.4 1. FY214E 612 3,836 13.1 12 14.5 6.1 6..4 1.1 Simplex Infra FY213E 1,23 6,732 9.3 135 27.2 11. 7.6.8.5 FY214E 1,23 7,92 9.6 174 35.1 12.6 5.9.7.4 May 14, 212 7

ITD Cementation India 1QCY212 Result Update Concerns Proper execution of ongoing projects is necessary for the company as any slowdown or freezing of projects either because of some approvals, clearance or investment issues may adversely affect the company s performance, as it directly affects the company s revenue. Disruption in the schedule of projects due to natural calamities is a big risk for the company. Volatility in raw-material prices in the coming years (i.e., steel and cement prices) may put pressure on the company s margin. Competition in the business also poses a big threat for the company. Any further slowdown in the economy may adversely affect the company s performance. May 14, 212 8

ITD Cementation India 1QCY212 Result Update Profit and Loss (Standalone) Y/E December CY28 CY29 CY21 CY211 CY212E CY213E Gross sales 966 98 1,72 1,297 1,557 1,868 Less: Excise duty 8 7 15 15 22 26 Net Sales 958 973 1,57 1,283 1,535 1,842 Other operating income - - - - - Total operating income 958 973 1,57 1,283 1,535 1,842 % chg 22.2 1.5 8.7 21.4 19.7 2. Net Raw Materials 42 374 418 463 571 685 % chg 36.1 (7.1) 11.9 1.8 23.2 2.1 Other Mfg costs 271 271 238 35 344 413 % chg 8..2 (12.1) 27.9 12.8 2. Personnel 74 84 12 124 147 177 % chg 8.1 12.6 22. 21.6 18.9 2. Other 152 152 21 255 32 363 % chg 29.6.2 32.5 26.6 18.7 2. Total Expenditure 899 88 96 1147 1365 1638 EBITDA 59 92 97 136 171 24 % chg (4.5) 55.9 5. 4.5 25.2 19.7 (% of Net Sales) 6.2 9.5 9.2 1.6 11.1 11.1 Depreciation & Amortisation 2 31 31 34 36 38 EBIT 39 62 66 12 135 166 % chg (16.6) 56.3 7.3 54. 32. 23.6 (% of Net Sales) 4.1 6.3 6.3 7.9 8.8 9. Interest & other Charges 47 71 78 93 13 12 Other Income 14 17 24 13 14 17 (% of Net Sales) 1.5 1.8 2.3 1..9.9 Recurring PBT (8) (1) (12) 9 31 46 % chg (124.) 29.2 18.3 (178.9) 24.9 49.2 PBT (reported) 6 8 12 22 45 63 Tax 1 2 3 (1) 13 19 (% of PBT) 14.6 29.5 23.3 (2.5) 3. 3. PAT (reported) 6 5 9 23 31 44 Extraordinary Expense/(Inc.) 9 ADJ. PAT (3) 5 9 23 31 44 % chg (141.8) 275. 72. 146.2 39.5 4.3 (% of Net Sales) (.3).5.9 1.8 2. 2.4 Basic EPS (`) (2.6) 4.6 7.9 19.6 27.3 38.3 Fully Diluted EPS (`) (2.6) 4.6 7.9 19.6 27.3 38.3 % chg (141.8) 275. 72. 146.2 39.5 4.3 May 14, 212 9

ITD Cementation India 1QCY212 Result Update Balance Sheet (Standalone) Y/E December CY28 CY29 CY21 CY211 CY212E CY213E SOURCES OF FUNDS Equity Share Capital 12 12 12 12 12 12 Reserves& Surplus 338 342 35 37 399 441 Shareholder s Funds 35 354 361 381 41 452 Total Loans 415 497 525 633 728 843 Deferred Tax (Net) - - - (8) (8) (8) Total Liabilities 764 851 886 1,7 1,13 1,288 APPLICATION OF FUNDS Gross Block 229 294 322 395 414 435 Less: Acc. Depreciation 16 135 165 197 233 27 Net Block 123 159 158 198 182 165 Capital Work-in-Progress 4 2 12 3 3 3 Lease adjustment - - - - - - Goodwill - - - - - - Investments 13 23 37 41 41 41 Current Assets 945 956 114 121 1363 163 Cash 11 11 35 23 28 28 Loans & Advances 175 18 131 25 245 294 Inventory 37 352 357 416 462 555 Debtors 389 413 491 557 627 752 Current liabilities 356 289 335 436 459 551 Net Current Assets 589 667 679 765 94 1,79 Misc. Exp. not written off - - - - - - Total Assets 764 851 886 1,7 1,13 1,288 May 14, 212 1

ITD Cementation India 1QCY212 Result Update Cash Flow (Standalone) Y/E December CY28 CY29 CY21 CY211 CY212E CY213E Profit before tax 6 8 12 22 45 63 Depreciation 2 31 31 34 36 38 Change in Working Capital (3) (78) 12 (98) (134) (175) Direct taxes paid (1) (2) (3) 1 (13) (19) Others 2 56 59 74 (14) (17) Cash Flow from Operations (272) 14 111 33 (81) (11) (Inc.)/Dec. in Fixed Assets (87) (27) (39) (64) (2) (21) (Inc.)/Dec. in Investments (8) (1) (14) (4) - - Others 37 14 17 5 14 17 Cash Flow from Investing (58) (23) (36) (62) (6) (4) Issue of Equity - - - - - - Inc./(Dec.) in loans 333 82 28 19 94 116 Dividend Paid (Incl. Tax) (1) (1) (2) (3) (2) (2) Others (42) (72) (77) (89) - - Cash Flow from Financing 29 9 (51) 17 92 113 Inc./(Dec.) in Cash (41) () 24 (12) 5 () Opening Cash balances 52 11 11 35 23 28 Closing Cash balances 11 11 35 23 28 28 May 14, 212 11

ITD Cementation India 1QCY212 Result Update Key Ratios (Standalone) Y/E December CY28 CY29 CY21 CY211 CY212E CY213E Valuation Ratio (x) P/E (on FDEPS) (7.6) 4.3 23.5 9.5 6.8 4.9 P/CEPS 12.9 6. 5.4 3.8 3.2 2.6 P/BV.6.6.6.6.5.5 Dividend yield.5.5.8 1.1 1.1 1.1 EV/Net sales.6.7.6.6.6.5 EV/EBITDA 1.2 7.3 6.9 5.8 5.1 4.8 EV / Total Assets.8.8.8.8.8.8 Per Share Data (`) EPS (Basic) (2.6) 4.6 7.9 19.6 27.3 38.3 EPS (fully diluted) (2.6) 4.6 7.9 19.6 27.3 38.3 Cash EPS 14.5 31.2 34.6 49.3 58.5 71.1 DPS 1. 1. 1.5 2. 2. 2. Book Value 33.8 37.3 313.7 331. 356.3 392.6 DuPont Analysis EBIT margin 4.1 6.3 6.3 7.9 8.8 9. Tax retention ratio.9.7.8.7.7.7 Asset turnover (x) 1.4 1.2 1.3 1.4 1.4 1.5 ROIC (Post-tax) 4.8 5.3 6.3 7.3 8.8 9.5 Cost of Debt (Post Tax) 9.7 1.1 11.4 1. 1. 1. Leverage (x) 1.1 1.3 1.3 1.5 1.6 1.7 Operating ROE (.7) (1.). 3.4 7.1 8.8 Returns ROCE (Pre-tax) 5.1 7.2 7.5 1. 11.8 12.8 Angel ROIC (Pre-tax) 5.6 7.5 8.2 1.8 12.6 13.6 ROE (.9) 1.5 2.6 6.1 7.9 1.2 Turnover ratios (x) Asset TO (Gross Block) 4.2 3.3 3.3 3.3 3.7 4.2 Inventory / Net sales (days) 131 136 123 11 11 11 Receivables (days) 126 15 156 149 149 149 Payables (days) 155 134 119 123 123 123 WC cycle (ex-cash) (days) 163 232 225 197 192 191 Solvency ratios (x) Net debt to equity 1.1 1.3 1.3 1.5 1.6 1.7 Net debt to EBITDA 6.6 5. 4.7 4.2 3.9 3.8 Int. Coverage (EBIT/ Int.).8.9.9 1.1 1.3 1.4 May 14, 212 12

ITD Cementation India 1QCY212 Result Update Research Team Tel: 22-393578 E-mail: research@angelbroking.com Website: www.angelbroking.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies 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. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report. Disclosure of Interest Statement ITD Cementation 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%) May 14, 212 13