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Sadbhav Infrastructure Projects Ltd Research Report - 21st Jan 2016

Infrastructure | Published on Nov 09th 2015


For 1HFY2016, Sadbhav Infrastructure Project Ltd (SIPL) reported a consol. top-line of Rs274cr (vs Rs500cr in FY2015). The Reported top-line (for 1HFY2016), on a yoy basis benefitted from (1) 16.2% toll income growth across Hyderabad-Yadagiri project, (2) 69.2% gross toll income growth across Maharashtra Border Check Post project (as 4 new check posts commenced operations in 2QFY2016; 18% toll hike seen during the quarter), and (3) 11.1% toll income growth seen across the Ahmadabad Ring Road project. The Reported EBITDA for 1HFY2016 stood at Rs180cr while the EBITDA margin for the same period was at 65.7% (vs 61.7% for FY2015). Higher interest expenses (Rs284cr for 1HFY2016 vs Rs526cr for FY2015) led to losses for SIPL of Rs159cr for 1HFY2016. Outlook and valuation: We expect SIPL to report a strong 44.3%/47.8% revenue/EBITDA CAGR over FY2015-17E. Management expects SIPL’s entire BOT portfolio (we model MBHPL to commission operations in FY2018E only) to be operational by FY2017E only. Toll collection at its existing projects would further ramp-up, going forward. Interest expenses accounted for 170% of the FY2015 consol. EBITDA. We expect this ratio to decline to ~95% by FY2017E. PAT level losses since FY2013 have eroded overall net worth of consol. entity from Rs971cr in FY2013 to `788cr in FY2015. Despite uptick in traffic numbers across its road portfolio, there exists a possibility of the company continuing to report losses for next few quarters, as it would be impacted by 3 new projects commencing operations in next few months, as highlighted by the Management. Our view that SIPL would continue to report losses stems from the point that peak debt requirement of the company (assuming no projects are added/ acquired) would be at Rs8,510cr by FY2017E. The incremental debt requirement would be towards new projects and stake acquisition of DPTL and MBHPL projects. SIPL, at consol. level, should report cash level profits from 4QFY2016E onwards. We have valued SIPL using Sum-of-The-Parts method, where we have valued each project using “Free Cashflow to Equityholders” method and adjusted standalone entity’s FY2016E debt to arrive at a fair value of Rs100/share. Given the limited upside potential from the current levels, we maintain our NEUTRAL rating on the stock.

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CMP 100
Target Price
Investment Period12 Months

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