4QFY2016 Result Update | Infrastructure

May 6, 2016

Sadbhav Engineering

BUY

CMP

`252

Performance Highlights

Target Price

`298

Quarterly highlights - Standalone

Investment Period

12 Months

Y/E March (` cr)

4QFY16 4QFY15

% chg (yoy) 3QFY16

% chg (qoq)

Net sales

858

967

(11.3)

753

13.9

Stock Info

Operating profit

(15.0)

10.2

Sector

Infrastructure

Adj. Profit

28.0

91.7

Market Cap (` cr)

4,330

Source: Company, Angel Research

Net Debt (` cr)

1,022

Sadbhav Engineering (SEL) reported an impressive Adj. PAT for 4QFY2016. On

Beta

1.1

the top-line front, it reported an 11.3% yoy decline to `858cr, which is lower than

52 Week High / Low

370/199

our estimates. Lower contribution from the in-house BOT portfolio led to such

Avg. Daily Volume

154,144

revenue decline. Further, higher employee expenses in addition to low

contribution from in-house BOT projects led SEL to report a 41bp yoy decline in

Face Value (` )

EBITDA margin to 9.5%, which is almost in-line with our expectations. PAT for the

BSE Sensex

25,262

quarter came in at `41cr. On adjusting for exceptional item of `9cr, SEL’s Adj.

Nifty

7,736

PAT stood at `50cr, which is ahead of our expectation of `44cr. Adjusted PAT

Reuters Code

SADE.BO

margin stood at 5.8% for the quarter vs 4.0% in corresponding period a year

Bloomberg Code

SADE@IN

ago. 4QFY2016 Adj. PAT benefited from high other income and low tax rate. As

of 4QFY2016, SEL is sitting on an order book of `7,487cr (Order Book to LTM

ratio at 2.4x), which provides good revenue visibility.

Shareholding Pattern (%)

Outlook and Valuation: Road order wins in FY2016, strong NHAI bid pipeline,

Promoters

47.1

uptick in MDO awarding, strengthens our view that Sadbhav is poised to report

MF / Banks / Indian Fls

28.1

2.4x growth in its Order Inflows during FY2016-18E to `6,050cr. Considering

FII / NRIs / OCBs

15.0

execution cycle and Order Book mix, we expect Sadbhav to report 1.6x growth in

its Order book during FY2016-18E to `11,949cr. On the back of their strong

Indian Public / Others

9.8

Order Book, we expect Sadbhav to report 14.0% revenue CAGR during FY2016-

18E to `4,140cr. On assuming 36bps EBITDA margin expansion, conservative

other income and low tax rate for FY2017/2018E, we expect SEL’s PAT margin to

Abs. (%)

3m 1yr

3yr

expand by 75bps during FY2016-18E to 4.9%.

Sensex

4.0

(5.4)

28.4

We value SEL using Sum-Of-The-Parts methodology. We value standalone entity

Sadbhav

(15.7)

(13.3)

121.7

on P/E multiple of 12.0x its FY2018E EPS of `11.9, resulting in value of `143 per

share. We value BOT projects individually using Free Cash flow to Equity holder’s

3-Year Daily Price Chart

method. Our value for SIPL’s portfolio of BOT projects comes to `154/share,

400

which is 52% of overall SOTP value for the company. On combining the value of

320

EPC business and BOT projects, we arrive at a combined business value of

`298/share, reflecting 18% upside in stock price from current levels. Accordingly,

240

we upgrade our recommendation on the stock to BUY.

160

Key financials (Standalone)

Y/E March (` cr)

FY13

FY14

FY15

FY16

FY17E

FY18E

Net Sales

1,811

2,358

2,970

3,186

3,598

4,140

% chg

(32.3)

30.2

25.9

7.3

12.9

15.1

Net Profit

145

118

134

155

205

% chg

(47.3)

1000.3

(18.4)

13.4

15.8

32.3

Source: Company, Angel Research

EBITDA (%)

8.6

10.6

10.3

10.2

10.3

10.6

EPS (Rs)

P/E (x)

51.6

36.0

38.1

32.4

27.9

21.1

P/BV (x)

4.6

4.0

3.2

2.9

2.7

2.4

RoE (%)

9.3

11.9

9.9

9.4

9.9

11.9

RoCE (%)

9.0

12.0

10.3

10.5

0.0

12.9

Yellapu Santosh

EV/Sales (x)

2.5

2.0

1.8

1.7

1.5

1.3

022 - 3935 7800 Ext: 6811

EV/EBITDA (x)

28.7

18.5

17.4

16.4

14.4

11.9

[email protected]

Source: Company, Angel Research; Note: CMP as of May 5, 2016

Please refer to important disclosures at the end of this report

Sadbhav Engineering | 4QFY2016 Result Update

Exhibit 1: 4QFY2016 performance (Standalone)

Particulars (` cr)

4QFY16

3QFY16

% chg (qoq) 4QFY15

% chg (yoy)

FY16

FY15

% chg (yoy)

Net Sales

858

753

13.9

967

(11.3)

3,186

2,970

7.3

Total Expenditure

777

679

14.3

872

(10.9)

2,861

2,665

7.3

Construction Expenses

700

608

15.1

785

(10.8)

2,590

2,432

6.5

Changes in Inv. Of FG & WIP

nmf

Employee Benefits Expense

(0.5)

15.6

122

25.5

Other Expenses

14.0

(23.9)

148

136

8.9

EBITDA

10.2

(15.0)

325

304

6.9

EBIDTA %

9.5

9.8

9.9

10.2

10.3

Depreciation

(1.6)

44.6

3.9

EBIT

15.1

(25.9)

240

223

8.0

Interest and Financial Charges

32.9

8.6

(3.2)

Other Income

1,578.8

65.8

54.0

PBT before Exceptional Items

59.6

(22.6)

179

150

19.6

Exceptional Items

(1)

PBT after Exceptional Items

26.6

(36.0)

160

150

6.7

Tax

(60.7)

(90.6)

(18.0)

% of PBT

6.3

20.2

42.7

16.5

21.4

PAT

48.7

4.7

134

118

13.4

Adj. PAT

91.7

28.0

153

118

29.9

Adj. PAT %

5.8

3.4

4.0

4.8

4.0

Dil. EPS

2.37

1.59

49.1

2.27

4.4

7.79

7.25

7.4

Source: Company, Angel Research

Execution takes beating during the quarter

SEL reported 11.3% yoy revenue decline in 4QFY2016 to `858cr. Revenue decline

is owing to 14.5% decline in revenues booked from in-house BOT projects (46.8%

of 4QFY2016 revenues booked). Completion of BOT projects and lack of

contribution from orders won in FY2016, led to such fall in yoy revenues. Revenue

from EPC road projects declined 15.5% yoy to `160cr, owing to completion of old

projects in the order book.

Exhibit 2: Segment-wise Revenue movement

% chg

Segment

FY16

FY15

(yoy)

Roads

562

560

593

507

659

445

(14.8)

BOT

402

428

461

407

470

374

(14.5)

EPC

160

132

100

189

(15.5)

Irrigation

204

100

201

166

138

22.9

Mining

120

139

(37.2)

Power Gen. & Oth. Inc.

49.5

Revenues

858

753

746

829

965

722

(11.3)

Source: Company, Angel Research

Again, if we look at revenue booking for the quarter from top 5 projects, then the

top 5 projects contributed 55.3% of 4QFY2016 revenues (vs 74.2% in the previous

quarter). Further, all the 3 Captive Road projects contributed a major chunk of the

quarter’s revenues (accounted for 41.8% of the quarter’s revenues).

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Exhibit 3: Quarterly Revenue movement

Exhibit 4: Revenues from Top 5 Projects

1,200

21.1

Revenues (` cr)

yoy growth (%)

Project Name

Vertical

4QFY16 3QFY16

1,000

Rohtak-Hissar

Captive Road BOT

126

162

21.0

25.4

(11.3)

Mysore-Bellary

Captive Road BOT

176

164

800

(20)

DMRC

Road EPC

103

600

Bhilwara-Rajsamand Captive Road BOT

(40)

Radhanpur-Manpur Irrigation

400

(60)

Kachch Branch Cap. Irrigation

(89.9)

200

(80)

Total Revenues

858

753

(100)

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

As % of total

55.3%

74.2%

Source: Company, Angel Research

For FY2016, Sadbhav reported 7.3% yoy increase in revenues to `3,186cr, mainly

owing to weak opening order book and minimal revenue contribution from EPC

orders won since Feb-2015. For the full year, revenue from Mining & Road-EPC

projects declined by 20.2% and 13.9% yoy respectively and was compensated by

an impressive 20% yoy growth in revenue from Road-BOT projects segment.

EBITDA Margins decline yoy to 9.5%

SEL reported an EBITDA of `81cr for 4QFY2016, down 15.0% yoy, but up 10.2%

qoq. The EBITDA margin declined 41bp yoy to 9.5%. In addition to slower

execution, a 15.6% yoy increase in employee expenses led to a decline in the

EBITDA margin. Higher yoy contribution of low margin irrigation business and

lower yoy contribution of high margin mining business led to margin decline. Also,

increase in VAT rates for Rohtak-Hissar project also contributed to yoy EBITDA

margin decline.

Exhibit 5: EBITDA% declines

Exhibit 6: Quarterly Expense movement

120

11.5

Emp. Exp as % of sales Const. Exp as % of sales Oth. Exp as % of sales

EBITDA (` cr)

EBITDA (%)

10.8

100

10.8

11.0

4QFY16

4.3

81.6

4.1

10.5

3QFY16

4.3

80.8

4.1

9.9

9.8

10.0

9.5

2QFY16

4.3

80.8

4.1

9.5

1QFY16

3.4

82.0

3.8

9.0

4QFY15 2.8

81.2

6.2

8.5

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

20%

40%

60%

80%

100%

Source: Company, Angel Research

On the back of high contribution from the low margin Irrigation projects, the

EBITDA margins for FY2016 declined by 4bp to 10.2%.

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Higher Other Income and lower tax aid PAT growth

PAT for the quarter came in at `41cr. Adjusting for exceptional item of `9cr, SEL’s

Adj. PAT stood at `50cr, ahead of our expectation of `44cr. Exceptional item for

the quarter includes, (1) `18.9cr write-off related to settlement agreement with

Ocean Bright Corp., and (2) `9.8cr of provision reversal related to Dhule Palesnar

BOT (as this SPV is no longer required to pay 1% labour cess to state government).

Adjusted PAT margins were at 5.8% for the quarter vs 4.0% in the corresponding

period a year ago. 4QFY2016 Adj. PAT benefited from high other income and low

tax rate. Higher other income is owing to `12.6cr of interest income received from

GKC’s Irrigation projects. Lower tax during the quarter is on account of `2.7cr of

benefits availed sec. 80IA. Interest expenses on yoy basis increased to `27cr, on

account of (1) higher bank guarantees as the company bid for new projects and

(2) higher working capital on mobilization of recently won EPC projects.

Exhibit 7: D/E ratio at 0.7x

Exhibit 8: PAT% also expands

1,200

1.2

7.0

Debt o/s (` cr)

D/E (x)

Adj. PAT (` cr)

Adj. PAT %

5.8

1.1

6.0

1,000

5.1

1.1

1.0

4.0

5.0

800

1.0

0.9

4.8

3.4

4.0

0.9

600

0.8

3.0

0.7

400

0.7

2.0

0.6

200

0.5

1.0

0.4

0.0

2QFY14

4QFY14

2QFY15

4QFY15

2QFY16

4QFY16

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

Source: Company, Angel Research

Strong other income and lower tax rate contributed to 84bp yoy Adj. PAT margin

expansion to 4.8% in FY2016.

Execution to pick-up on the back of orders won in FY2016…

In FY2016 SEL reported order inflows of `2,508cr, majorly from Road EPC projects

(worth `2,365cr). In FY2016, SEL won 5 Road EPC projects worth `2,684cr and

reported cancellation of 1 project worth `319cr (Marve-Borivalli Road EPC project).

Exhibit 9: Details of Order Inflows during 1HFY2016

Project Detail

Segment

Length (kms)

TPC (` cr)

Duration

6-lane Eastern peripheral Expressway

Road EPC

792

2.5 yrs

6-lane Eastern peripheral Expressway

Road EPC

756

2.5 yrs

6-lane of UP/ Haryana border-Yamunanagar-Saha-Barwala-Panchkula

Road EPC

468

2.5 yrs

6-lane of UP/ Haryana border-Yamunanagar-Saha-Barwala-Panchkula

Road EPC

437

2.5 yrs

4-lane of Tapa-Bathinda (SEL stake-51%)

Road EPC

231

2.5 yrs

Total (5 Road Projects)

173

2,684

Source: Company, Angel Research

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

SEL has been announced L1 for 2 Hybrid project worth ~`1,350cr. SEL’s

unexecuted order book as of 4QFY2016 (excluding the 2 above-mentioned Hybrid

projects) stands at ~`7,487cr (Order book to LTM sales ratio at 2.4x). Roads &

Highways vertical (54%) continues to dominate SEL’s order book mix.

Exhibit 10: Quarterly Order Inflows (` cr)

Exhibit 11: Order Book (OB/ LTM sales at 2.4x)

2,000

Order Book (` cr)

OB/LTM sales (x)

1,608

10,000

3.5

2.9

9,000

1,500

2.8

2.7

2.5

2.4

3.0

8,000

1,076

7,000

2.5

923

1,000

6,000

2.0

620

5,000

500

4,000

1.5

144

3,000

1.0

2,000

0.5

3QFY2015

4QFY2015

1QFY2016

2QFY2016

3QFY2016

4QFY2016

1,000

0.0

(500)

(319)

3QFY2015 4QFY2015 1QFY2016 2QFY2016 3QFY2016 4QFY2016

Source: Company, Angel Research

Debt continues to increase…

Sadbhav has reported higher than expected increase in debt to `10,588cr (v/s

`9,383cr at FY2015-end). This is mainly on account of (1) additional support for

delays in receipt of grant worth `130cr given to SPVs (not yet returned) led to the

surge in debt and (2) stretch in the working capital. Notably, despite stretch in the

working capital cycle, trade payables declined from 141 days in FY2015 to 128

days in FY2016.

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Concall Highlights & Comments:

Huge bid pipeline in the offing: SEL’s management has highlighted that a large

bid pipeline, led by the Roads & Highways sector, is in the offing. SEL has guided

for FY2017E order wins in the range of ~`5,000-7,000cr.

In the Roads & Highways space, the Management currently is seeing tendering

activity of

~`40,000cr (EPC projects-

~`18,400cr; Hybrid Annuity projects-

`3,000cr and BOT projects-`17,700cr). In the Mining space, SEL has submitted

bids for Telangana & Rajasthan Coal/ Mining blocks. Also, SEL plans to submit

bids for 5 more MDO jobs. Further, SEL has already participated in a `1,450cr

Punjab based Irrigation bid.

Execution to catch-up from FY2017E onwards: SEL reported 5 large EPC project

wins in FY2016. Already `65cr has been spent towards gross block to start

execution of these projects. Also, SEL has received mobilization advance of `210cr.

Also, management highlighted that 80% of land towards Hybrid projects has been

acquired and works will start in 2HFY2017. On the whole, the Management

guided for FY2017 revenues of `3,700-3,800cr on the back of `2,500cr revenues

from Roads & Highways segment, ~`400cr from Mining segment and another

`800cr from Irrigation segment. Earlier than expected operationalization of the

Dhanbad mines could add another `100cr to the revenue guidance.

FY2016 EBITDA margins were impacted on account of (1) imposition of additional

VAT charges on 2 of the EPC projects, (2) higher contribution of low margin

Irrigation business, and (3) lower contribution of high margin Mining business. We

do not expect any further impact of additional VAT charges on EPC revenues, as

they would contribute less to FY2017E top-line. However, contribution of ongoing

Irrigation projects would continue to put pressure on FY2017E EBITDA margins.

Accordingly for FY2017E, we assume slightly lower EBITDA margins of 10.3%,

against Management’s guidance of 10.5%.

Management guides for improvement in Working capital cycle: Given that

~`150cr of loans and advances were made towards stalled Irrigation projects,

working capital cycle increased in FY2016. With these Irrigation projects expected

to get completed in FY2017E, we expect Loans & Advances to decline in FY2017E.

Further, Management indicated that SIPL would start repaying Loans & Advances

to SEL as SIPL has started making cash level profits.

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Update on SIPL’s Quarterly performance

SIPL reported 118.9% yoy increase in its 4QFY2016 consolidated revenues to

`281.8cr, reflecting (1) commissioning of Shrinathji-Udaipur project (contributed

`22.8cr of toll income), and (2) increase in O&M revenues (reported under the

standalone financials).

Exhibit 12: Toll Income across Operating BOT Projects

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

yoy (%)

Ahmedabad Ring Road (ARRIL)

10.6

Aurangabad-Jalna (AJTL)

(8.6)

Dhule-Palasner (DPTL)

9.8

Maharashtra Border (MBCPNL)

65.6

Rohtak Panipat (RPTL)

(19.5)

Bijapur- Hungund (BHTPL)

10.3

Hyderabad-Yadgiri (HYTPL)

29.7

Shreenathji-Udaipur (SUTPL)

Source: Company, Angel Research

AJTL reported 8.6% yoy decline in toll income to `8.7cr, owing to (1) 53.3%

decline in Trucks category (to `1.8cr), and (2) loss of toll income owing to

exemption on passenger cars and Maharashtra state government buses. However,

on like-to-like basis, toll income of LCV and MAV category grew 22.1% to `6.9cr.

Amongst all 8 operating BOT projects, HYTPL reported an impressive 29.7% yoy

increase to `15.2cr (includes benefit of 3.2% tariff hike). MBPCL BOT project on

the other hand, reported 65.6% yoy increase in fee income to `43.1cr, reflecting

benefits of 4 more check posts getting operational. RPTPL BOT project reported

19.5% yoy decline in toll income to `18.0cr, reflecting loss of toll income owing to

agitation/violence impact from 17^th to 27^th Feb 2016.

On the back of strong yoy top-line growth, EBITDA grew 136.5% to `177cr.

Alternatively, EBITDA margins also improved 467bp yoy to 62.8%. EBITDA margin

expansion on a yoy basis is despite `30.1cr of periodic maintenance. SIPL reported

net profit of `0.17cr against loss of `81.6cr in 4QFY2015. Net profit for

4QFY2016 includes the impact of one-time exceptional gain of `61.6cr resulting

from stake sale of Mumbai Nashik Expressway for consideration of `72cr (net cost

`10.4cr). On adjusting for exceptional gain, SIPL posted a net loss of `61.4cr.

With commissioning of Shrinathji Udaipur BOT project and consolidation of Dhule

Palesnar BOT project, interest expenses increased

32.3% yoy to

`185cr.

Consolidated debt of SIPL at 4QFY2016-end stands at `7,952cr against `6,204cr

as of 4QFY2015-end.

Update on SIPL’s FY2016 Yearly Financials

SIPL reported consolidated revenue of `742cr for FY2016, up 48.3% yoy, reflecting

the benefits of commissioning of Shrinathji-Udaipur BOT project, commencement

of additional check posts at MBCPNL and consolidation of the Dhule Palesnar BOT

project. EBITDA increased 54.5% yoy to `477cr in FY2016. Alternatively, EBITDA

margins expanded from 61.7% in FY2015 to 64.3% in FY2016. On adjusting for

exceptional gains of `11.7cr/`61.6cr in FY2015/FY2016, SIPL’s net loss stood at

`343cr/ `260.5cr in FY2015/ FY2016, respectively.

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Outlook and Valuation

Considering the Road order wins in FY2016, strong NHAI bid pipeline, uptick in

MDO awarding, strengthens our view that Sadbhav is poised to report 2.4x growth

in its Order Inflows during FY2016-18E to `6,050cr. Considering execution cycle

and Order Book mix, we expect Sadbhav to report 1.6x growth in its Order book

during FY2016-18E to `11,949cr.

On the back of strong `7,487cr of Order Book at 4QFY2016-end, we expect

Sadbhav to report 14.0% revenue CAGR during FY2016-18E to `4,140cr. With

contribution from the low margin Irrigation projects expected to further decline in

FY2017E, we have modeled 36bps EBITDA margin expansion during FY2016-18E

to 10.6%. Further, we have modeled conservative other income numbers and low

tax rate for FY2017/2018E at `14cr/14cr and 24%, respectively. Accordingly, we

expect Sadbhav’s PAT margin to expand by 75bp during FY2016-18E to 4.9%.

Exhibit 13: FY2017E Estimates & FY2018E Roll-Out

FY2017E

FY2018E

Y/E March (` cr)

Old

New

Change (%)

Net Sales

4,219

3,598

(14.7)

4,140

EBITDA

456

370

(18.8)

438

EBITDA Margins (%)

10.8

10.3

10.6

PAT

213

155

(27.2)

205

PAT Margins (%)

5.0

4.3

4.9

Source: Company, Angel Research

We have valued SEL using Sum-Of-The-Parts method. SEL’s EPC business (under

standalone entity) has been valued using FY2018E P/E multiple, whereas we have

used free cash flow to equity holders method to value BOT Road projects, which

are held under SIPL, the holding company for BOT Road projects.

Value of Core EPC business

Considering visibility on SEL’s core EPC business (standalone entity), we have

valued the standalone entity on P/E multiple of 12.0x its FY2018E EPS of `11.9cr,

resulting in a value of `143 per share.

Value of BOT projects

We have used free cash flow to equity holders method to value BOT Road projects,

which are held under SIPL, the holding company for BOT Road projects. Our value

for SIPL’s portfolio of BOT projects comes to `154/share, which is 52% of the

overall SOTP value for the company.

On combining the value of EPC business and BOT projects, we arrive at a

combined business value of `298/share, reflecting 18% upside in the stock price

from the current levels. Accordingly, we upgrade our recommendation on the stock

to BUY.

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Investment arguments

Strong Order Backlog: SEL in FY2016 reported order wins to the tune of `2,509cr.

All these EPC order wins are Non-Captive Road projects. As of 4QFY2016-end,

SEL is sitting on a healthy order book of `7,487cr (2.4x order book to LTM ratio).

We expect the awarding activity from NHAI & MoRTH to further gain momentum

and SEL to emerge as a strong beneficiary. Accordingly, we model 1.6x growth in

order backlog from `7,487cr in FY2016 to `11,949cr by FY2018E.

Order Backlog gives strong revenue visibility: At 4QFY2016-end, SEL was sitting

on a strong order book of `7,487cr. Considering their diligent bidding strategy,

and past execution track record, we are comforted that project execution

momentum would further gain from the current levels. Accordingly, we expect SEL

to report a strong 14.0% top-line CAGR during FY2016-18E.

Strong execution to further drive PAT growth: At the backdrop of strong execution,

benign bitumen costs and other operating levers coming into play, we expect SEL

to report 16.0% EBITDA CAGR during FY2016-18E. In-line with EBITDA growth,

we expect SEL to report 23.8% PAT CAGR during FY2016-18E.

Sound Balance Sheet: SEL has a sound balance sheet with consol. net debt/equity

of 0.7x as of 4QFY2016. SEL’s working capital position (Working Capital to LTM

sales ratio as of FY2016 stands at 24.9%) is better than most of its peers. This has

helped the company maintain strong earnings growth up to a certain extent.

Funds tied up for SIPL projects in the portfolio: SEL successfully raised `400cr

through 22% stake dilution in its subsidiary SIPL in Aug-2010. Further, in Sep-

2015, SIPL got listed on the Indian bourses, where it raised equity for its last

pending project Shreenathji-Udaipur. Now, SIPL is fully tied-up for all of its BOT

projects in-hand. Timely fund raising exercise at regular intervals has helped SEL

focus on project execution, thereby, leading to early completion of projects.

Company background

SEL was incorporated in 1988. The company is a leading EPC and infrastructure

development company based in Ahmedabad. SEL is present in the Roads and

Highways (54.3% of order book), Irrigation (19.3%) and Mining (26.4%) sectors.

The company forayed into the road sector in 1995 and has since then executed

several projects for NHAI and state governments. Currently, SEL through its

subsidiary SIPL is one of the largest BOT players in India with 12 projects in its

portfolio.

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Profit & loss statement (Standalone)

Y/E March (` cr)

FY13

FY14

FY15

FY16

FY17E FY18E

Net Sales

1,811

2,358

2,970

3,186

3,598

4,140

% Chg

(32.3)

30.2

25.9

7.3

12.9

15.1

Total Expenditure

1,655

2,109

2,665

2,861

3,228

3,703

Construction Expenses

1,520

1,945

2,432

2,590

2,950

3,395

Employee benefits Expense

122

116

132

Other Expenses

104

136

148

162

176

EBITDA

156

249

304

325

370

438

% Chg

(46.3)

60.1

22.1

6.9

13.7

18.3

EBIDTA %

8.6

10.6

10.3

10.2

10.3

10.6

Depreciation

EBIT

124

202

223

240

281

342

% Chg

(51.0)

63.0

10.3

8.0

16.8

21.7

Int. and Fin. Charges

Other Income

PBT

120

150

180

204

270

Tax

(24)

% of PBT

73.7

(20.1)

21.4

14.7

24.0

PAT before Exceptional item

145

118

153

155

205

Exceptional item

PAT

145

118

134

155

205

% Chg

(47.3)

1000.3

(18.4)

13.4

15.8

32.3

PAT %

0.7

6.1

4.0

4.2

4.3

4.9

Basic EPS

Diluted EPS

% Chg

(47.7)

43.3

(5.4)

17.6

15.8

32.3

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Balance sheet (Standalone)

Y/E March (` cr)

FY13

FY14

FY15

FY16

FY17E

FY18E

Sources of Funds

Equity Capital

Reserves Total

817

942

1,335

1,472

1,609

1,796

Networth

833

957

1,352

1,489

1,626

1,813

Total Debt

673

863

938

1,059

1,074

959

Other Long-term Liabilities

Deferred Tax Liability

Total Liabilities

1,618

1,908

2,348

2,574

2,729

2,801

Application of Funds

Gross Block

515

726

851

955

1,054

1,163

Accumulated Depreciation

185

228

315

400

489

585

Net Block

330

498

536

555

565

578

Capital WIP

Investments

538

521

531

528

568

603

Current Assets

Inventories

102

164

213

141

220

230

Sundry Debtors

736

732

907

999

1,129

1,265

Cash and Bank Balance

Loans, Adv. & Deposits

535

489

651

595

700

805

Other Current Asset

100

127

Current Liabilities

873

1,120

1,177

1,062

1,329

1,518

Net Current Assets

555

387

693

795

878

977

Other Assets

194

502

588

679

717

643

Total Assets

1,618

1,908

2,348

2,557

2,727

2,801

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Cash flow statement (Standalone)

Y/E March (` cr)

FY13

FY14

FY15

FY16

FY17E

FY18E

Profit before tax

106

114

134

155

205

Depreciation

Change in Working Capital

(107)

312

(296)

(246)

168

Interest & Fin. Charges

118

138

Direct taxes paid

(49)

(59)

(26)

(49)

(65)

Other Non-Cash Charges

(11)

(15)

(3)

(1)

Cash Flow from Operations

524

(37)

318

489

(Inc)/ Dec in Fixed Assets

(70)

(218)

(149)

(104)

(99)

(109)

(Inc)/ Dec in Inv. & Oth. Adj.

(263)

(349)

(103)

(154)

(152)

Cash Flow from Investing

(332)

(568)

(252)

(5)

(253)

(260)

Issue/ (Buy Back) of Equity

315

Inc./ (Dec.) in Loans

310

258

120

(115)

Dividend Paid (Incl. Tax)

(10)

(11)

(12)

(10)

(18)

Interest Expenses

(84)

(118)

(132)

(86)

(91)

(86)

Cash Flow from Financing

218

157

237

(94)

(219)

Inc./(Dec.) in Cash

(48)

113

(52)

(28)

Opening Cash balances

Closing Cash balances

120

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Key Ratios

Y/E March

FY13 FY14 FY15 FY16 FY17E FY18E

Valuation Ratio (x)

P/E (on FDEPS)

51.6

36.0

38.1

32.4

27.9

21.1

P/CEPS

85.3

20.0

22.1

19.8

17.8

14.4

Dividend yield (%)

0.2

0.3

0.2

0.4

EV/Sales

2.5

2.0

1.8

1.7

1.5

1.3

EV/EBITDA

28.7

18.5

17.4

16.4

14.4

11.9

EV / Total Assets

2.8

2.4

2.2

2.1

2.0

1.9

Per Share Data (`)

EPS (Basic)

4.9

7.0

6.6

7.8

9.0

11.9

EPS (fully diluted)

0.9

9.5

6.6

7.8

9.0

11.9

Cash EPS

3.0

12.6

11.4

12.7

14.2

17.5

DPS

0.6

0.7

0.5

0.9

Book Value

106

Returns (%)

RoCE (Pre-tax)

9.0

12.0

10.3

10.5

0.0

12.9

Angel RoIC (Pre-tax)

10.5

13.4

11.9

11.2

0.0

13.4

RoE

9.3

11.9

9.9

9.4

9.9

11.9

Turnover ratios (x)

Asset Turnover (Gross Block) (x)

5.9

5.7

5.8

6.4

7.2

Inventory / Sales (days)

Receivables (days)

150

114

101

109

108

106

Payables (days)

176

154

141

128

121

126

Leverage Ratios (x)

D/E ratio (x)

0.8

0.7

0.6

0.5

Net Debt/ EBITDA (x)

4.2

3.2

3.0

3.1

2.7

2.0

May 6, 2016

Sadbhav Engineering | 4QFY2016 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

DISCLAIMER

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ownership of more than 1% in the company covered by Analyst. Angel or its associates/analyst has not received any compensation /

managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. Angel/analyst

has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity

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document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way

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Disclosure of Interest Statement

Sadbhav Engg

1. Analyst ownership of the stock

2. Angel and its Group companies ownership of the stock

3. Angel and its Group companies' Directors ownership of the stock

4. Broking relationship with company covered

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Based on expected returns

Buy (> 15%)

Accumulate (5% to 15%)

Neutral (-5 to 5%)

over 12 months investment period):

Reduce (-5% to -15%)

Sell (< -15)

May 6, 2016