2QFY2016 Result Update | Infrastructure
November 9, 2015
Sadbhav Infrastructure Project
NEUTRAL
CMP
`100
Performance Highlights
Target Price
-
Investment Period
-
For 1HFY2016, Sadbhav Infrastructure Project Ltd (SIPL) reported a consol.
top-line of `274cr (vs `500cr in FY2015). The Reported top-line (for 1HFY2016),
on a yoy basis benefitted from
(1)
16.2% toll income growth across
Stock Info
Hyderabad-Yadagiri project,
(2)
69.2% gross toll income growth across
Sector
Infrastructure
Maharashtra Border Check Post project (as 4 new check posts commenced
Market Cap (` cr)
3,508
operations in 2QFY2016; 18% toll hike seen during the quarter), and (3) 11.1%
Net Debt (` cr)
6,034
toll income growth seen across the Ahmadabad Ring Road project.
Beta
NA
The Reported EBITDA for 1HFY2016 stood at `180cr while the EBITDA margin for
52 Week High / Low
112/96
the same period was at 65.7% (vs 61.7% for FY2015).
Avg. Daily Volume
201,158
Higher interest expenses (`284cr for 1HFY2016 vs `526cr for FY2015) led to
Face Value (` )
10
losses for SIPL of `159cr for 1HFY2016.
BSE Sensex
26,265
Outlook and valuation: We expect SIPL to report a strong
44.3%/47.8%
Nifty
7,954
revenue/EBITDA CAGR over FY2015-17E. Management expects SIPL’s entire BOT
Reuters Code
SADB.NS
portfolio (we model MBHPL to commission operations in FY2018E only) to be
Bloomberg Code
[email protected]
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.
Shareholding Pattern (%)
Promoters
69.2
PAT level losses since FY2013 have eroded overall net worth of consol. entity from
MF / Banks / Indian Fls
4.7
`971cr 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
FII / NRIs / OCBs
3.1
losses for next few quarters, as it would be impacted by 3 new projects
Indian Public / Others
23.0
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)
Abs. (%)
3m 1yr
3yr
would be at `8,510cr by FY2017E. The incremental debt requirement would be
Sensex
(7.0)
(5.8)
39.0
towards new projects and stake acquisition of DPTL and MBHPL projects.
SIPL
(6.3)
NA NA
SIPL, at consol. level, should report cash level profits from 4QFY2016E onwards.
*Note- SIPL listed on Sep 16, 2015
We have valued SIPL using Sum-of-The-Parts method, where we have valued each
3-Year Daily Price Chart
project using “Free Cashflow to Equityholders” method and adjusted standalone
108
entity’s FY2016E debt to arrive at a fair value of `100/share. Given the limited upside
106
potential from the current levels, we maintain our NEUTRAL rating on the stock.
104
102
Key financials (Consolidated)
100
Y/E March (` cr)
FY13
FY14
FY15
FY16E
FY17E
98
96
Net Sales
287
371
500
675
1,042
94
% chg
63.2
29.2
34.8
34.9
54.5
Net Profit
(46)
(156)
(313)
(248)
(107)
% chg
nmf
nmf
nmf
nmf
nmf
EBITDA (%)
59.0
65.1
61.7
64.9
66.6
Source: Company, Angel Research
EPS (`)
(1.5)
(5.0)
(10.1)
(8.0)
(3.5)
P/BV (x)
3.2
3.8
4.5
3.7
4.1
RoE (%)
(5.0)
(17.4)
(38.9)
(28.4)
(11.8)
RoCE (%)
2.9
2.9
2.6
3.6
5.5
Yellapu Santosh
EV/Sales (x)
23.3
21.5
19.1
11.6
8.0
022 - 3935 7800 Ext: 6811
EV/EBITDA (x)
39.5
32.9
30.9
17.9
11.9
[email protected]
Source: Company, Angel Research
Please refer to important disclosures at the end of this report
1
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Key financials (Consolidated)
Particulars (` cr)
1HFY16
Net Sales
274
Total Expenditure
94
Operating Expense
70
Employee Benefits Expense
14
Other Expenses
9
EBITDA
180
EBIDTA %
65.7
Depreciation
78
EBIT
102
Interest and Financial Charges
284
Other Income
15
PBT before Exceptional Items
(167)
Exceptional Items
0
PBT after Exceptional Items
(167)
Tax
0
% of PBT
(0.7%)
PAT
(167)
Share of loss transferred to Minority Interest
(8)
Share of loss transferred to Minority Interest related to earlier years
0
Net Loss
(159)
PAT %
(58.3)
Dil. EPS
5.05
Source: Company, Angel Research
Toll Income shows strong growth
For 1HFY2016, SIPL reported a consol. top-line of `274cr (vs `500cr 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.
Amongst other projects, Dhule Palesnar BOT and Bijapur Hungund BOT reported
a 10.4% and 9.9% yoy gross toll income growth for 1HFY2016 to `72.5cr and
`56.6cr, respectively.
With toll exemption levied for passenger vehicles, Aurangabad-Jalna BOT project
was the only BOT which reported a 2.4% yoy decline in toll income for 1HFY2016
to `16.1cr.
November 9, 2015
2
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Exhibit 1: Gross Quarterly Toll Income (unadj. for stake)
(` cr)
2QFY2016
1QFY2016
4QFY2015
3QFY2015
2QFY2015
1QFY2015
4QFY2014
yoy chg. (%)
ARRIL
21
22
22
22
20
19
19
4.8
AJTL
7
9
10
9
8
9
8
(13.4)
DPTL
37
36
36
34
32
34
33
15.9
MBCPNL
37
34
26
24
22
20
15
65.3
RPTL
20
22
20
21
20
22
NA
0.0
BHTPL
28
28
27
25
26
26
24
8.5
HYTPL
12
13
12
11
11
11
12
12.0
Source: Company, Angel Research
The reported EBITDA for 1HFY2016 stood at `180cr while the EBITDA margin for
the same period was at 65.7% (vs 61.7% for FY2015).
Overall debt increased in 1HFY2016 as the company pursued stake purchases at
some of the SPVs and borrowed debt at standalone level (stop gap funding to
cover for shortfall of debt servicing). This resulted in higher interest expenses
(`284cr for 1HFY2016 vs `526cr for FY2015). Accordingly, SIPL incurred bottom-
line level loss of `159cr for 1HFY2016.
Update on Under-development Projects
During the quarter, construction works of Shreenathji-Udaipur (SUTPL) BOT Project
were completed. SIPL has already applied for CoD in Oct-2015 and expects to
commission the project soon.
Construction works across the Bhilwara-Rajsamand (BRTPL), Rohtak-Hissar
(RHTPL), and Mysore-Bellary (MBHPL) BOT projects are going-on as per schedule.
SIPL’s Management expects BRTPL and RHTPL to complete the construction works
ahead of the scheduled time of Apr-2016/ Jun-2016 by Jan-2016/ Apr-2016.
Works across MBHPL are progressing as per schedule and the Management
expects to finish EPC works by Jun-2016, which is before the scheduled CoD of
Jun-2017.
Equity requirement for ongoing BOT projects
At the time of the IPO, SIPL had pending equity requirements towards SUTPL. SIPL
through IPO route raised `82cr of equity and subordinate debt towards its
subsidiary, SUTPL. Given that entire equity is infused and SUTPL is awaiting CoD,
SIPL has no equity requirement towards the projects under execution phase.
Notably, SIPL is currently acquiring stake process from SEL and GKC for Mysore-
Bellary BOT project. For stake acquisition purposes, Management expects cash
outflow of `79cr. On completion of the stake acquisition, SIPL would hold the
entire 100% in the company.
November 9, 2015
3
Sadbhav Infrastructure Project | 2QFY2016 Result Update
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 the overall net worth of the consol.
entity from `971cr in FY2013 to `788cr in FY2015. Despite uptick in traffic
numbers across its road portfolio, there exists a possibility for SIPL to continue
reporting 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 `8,510cr by FY2017E. The incremental debt requirement would be
towards new projects and towards stake acquisition of DPTL and MBHPL projects.
Notably, SIPL at consol. level should report cash profits from 4QFY2016E
onwards.
Exhibit 2: SOTP break-up
Discounted
Adj. FCFE
Value/
Particulars
Segment
Project
Stake (%)
Basis
FCFE (` cr)
Val. (` cr)
share (`)
Road BOT projects
Maharashtra Border Check Post
Service Fee
2,051
90%
1,846
52
NPV at CoE of 12%
Rohtak-Panipat BOT Project
Toll
111
100%
111
3
NPV at CoE of 12%
Bijapur-Hungund BOT Project
Toll
330
77%
254
7
NPV at CoE of 12%
Ahmedabad Ring Road
Toll
568
100%
568
16
NPV at CoE of 12%
Aurangabad-Jalna BOT Project
Toll
428
100%
428
12
NPV at CoE of 12%
Hyderabad-Yadagiri BOT Project
Toll
135
100%
135
4
NPV at CoE of 12%
Nagpur-Seoni BOT Project
Annuity
15
100%
15
0
NPV at CoE of 12%
Shreenathji-Udaipur BOT Project
Toll
180
100%
180
5
NPV at CoE of 12%
Bhilwara-Rajsamand BOT Project
Toll
320
100%
320
9
NPV at CoE of 14%
Rohtak-Hissar BOT Project
Toll
262
100%
262
7
NPV at CoE of 14%
Mysore-Bellary BOT Project
Annuity
124
100%
124
4
NPV at CoE of 14%
Dhule-Palesnar BOT Project
Toll
390
100%
390
11
NPV at CoE of 12%
Total SIPL value
4,633
132
Standalone entity- Net debt (FY2016E)
(1,127)
(32)
Standalone net debt
Grand Total
4,914
3,506
100
Source: Company, Angel Research
We have valued SIPL using Sum-of-The-Parts method, where we have valued each
project using “Free cash-flow to Equity holders” method and adjusted the
standalone entity’s FY2016E debt to arrive at fair value of `100/share. Given the
limited upside the stock has from the current level, we maintain our NEUTRAL
rating on the stock.
November 9, 2015
4
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Exhibit 3: BOT Project Details
Project
ARRIL
AJTL
RHTL
NSEL
DPTL
MBCPNL
RPTL
BHTL
SUTL
BRTL
HYTL
Type
Toll
Toll
Toll Annuity
Toll
Entry Fees
Toll
Toll
Toll
Toll
Toll
Status
Oper. Oper. Oper. Oper.
Oper.
Part. Oper. Under Dev. Oper. Oper. Oper. Under Dev.
Lane Kms
305
263
395
111
355
22 CPs
323
389
317
349
143
Issuing Auth.
AUDA MSRDC NHAI NHAI
NHAI
MSRDC
NHAI NHAI NHAI NHAI
NHAI
State
Gujarat
Mah.
Har.
MP Mah./MP
Mah.
Haryana Karn.
Raj.
Raj.
Tel.
Concession (Yrs)
20
24
22
20
18
25
25
20
27
30
23
Con. Start
Dec-06 Feb-07 Jun-16 May-07 Dec-09 Dif. for all CPs
Apr-11 Sep-10 Apr-13 Apr-16
Jul-10
Con. End
Nov-26 Jul-30 May-28 Nov-27 Dec-27 Dif. for all CPs
Mar-36 Aug-30 Mar-40 Mar-46
Jun-33
TPC (` cr)
544
272
1,272
375
1,420
1,426
1,161
1,369
1,151
676
495
Equity+Sub-Debt
49
83
111
60
344
381
243
162
287
133
147
(` cr)
Debt o/s (` cr)
350
161
663
187
1,015
1,001
986
833
820
206
395
(as of 30.09.2015)
Grant (` cr)
36
-
-
-
-
-
-
273
-
-
-
Source: Company, Angel Research
November 9, 2015
5
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Company background
Sadbhav Infrastructure Project Ltd (SIPL) is a subsidiary of Ahmedabad-based
Sadbhav Engineering Ltd (SEL). SIPL was incorporated in 2007 as a developer and
is a roads and highways operator on a BOT- Toll/ Annuity basis. SIPL is into the
business of development, operation and maintenance of national and state
highways and roads in several states including Maharashtra, Gujarat, Rajasthan,
Karnataka, Haryana, Madhya Pradesh and Telangana, and a border check posts
project in Maharashtra.
It has a portfolio of 12 BOT projects of which 7 road projects are fully operational,
1 is partially operational (border check post) and 4 are under construction stage.
10 of the 12 BOT projects are toll projects (including service fee for the border
check posts in Maharashtra) and 2 are annuity projects. Of the 12, SIPL is in the
process of acquiring stake in 2 projects; ie, it would be acquiring 100% stake in
Mysore-Bellary Highway Pvt. Ltd and 100% in Dhule Palesnar Tollway Ltd. Of these
2 projects, 1 is operational and the other one is under development. Again, one of
them is a toll project and the other one is an Annuity project. This restructuring
process is in accordance with the company’s strategy to consolidate all BOT road
projects to be developed by SEL under one company- SIPL.
SIPL’s parent company SEL was incorporated in 1988 and has established itself as
one of the leading engineering, procurement and construction (EPC) and
infrastructure players in the country. In the last 25 years, SEL has developed a
strong project execution track record of various construction projects across 10
states in India and has a strong Balance Sheet. SIPL derives strength from its
parent SEL, which has been an EPC contractor for most of SIPL’s projects.
November 9, 2015
6
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Profit & loss statement (Consolidated)
Y/E March (` cr)
FY12
FY13
FY14
FY15
FY16E
FY17E
Net Sales
176
287
371
500
675
1,042
% Chg
153.2
63.2
29.2
34.8
34.9
54.5
Total Expenditure
83
118
129
191
237
348
Operating Expenses
65
97
89
141
165
240
Employee benefit Expense
6
10
16
24
33
51
Other Expenses
12
10
25
26
39
57
EBITDA
93
170
242
309
438
694
% Chg
108.2
82.1
42.5
27.8
41.7
58.6
EBIDTA %
52.9
59.0
65.1
61.7
64.9
66.6
Depreciation
22
50
92
141
152
190
EBIT
72
120
150
168
285
504
% Chg
107.8
67.1
25.4
12.1
69.5
76.7
Interest and Financial Charges
72
195
355
526
587
661
Other Income
23
28
22
28
32
31
PBT
23
(47)
(184)
(330)
(270)
(127)
Exceptional Items
0
0
0
(12)
0
0
Tax
13
5
12
0
0
0
% of PBT
56.6
nmf
nmf
nmf
nmf
nmf
PAT before share of losses
10
(52)
(196)
(342)
(270)
(127)
of Minority Interest & Associates
Share of (Profit)/Loss attributable
2
13
40
28
22
19
to Minority Interest
Share of Profit/(Loss) from Assoc.
(2)
(7)
0
0
0
0
Co.
Net Profit
10
(46)
(156)
(313)
(248)
(107)
% Chg
(0.3)
nmf
nmf
nmf
nmf
nmf
PAT %
5.6
(15.9)
(42.0)
(62.6)
(36.7)
(10.3)
Adj. EPS
0.3
(1.5)
(5.0)
(10.1)
(8.0)
(3.5)
Nmf- Not meaningful
November 9, 2015
7
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Balance sheet (Consolidated)
Y/E March (` cr)
FY12
FY13
FY14
FY15
FY16E
FY17E
Sources of Funds
Equity Capital
26
28
28
311
352
352
Reserves Total
820
943
792
477
606
508
Networth
847
971
820
788
958
860
Minority Interest
126
159
186
57
49
48
Total Debt
2,791
3,643
4,902
6,204
8,020
8,510
Other Long-term Liabilities
0
418
2,241
2,233
2,236
2,243
Long-term Provision
39
11
38
100
51
53
Total Liabilities
3,804
5,202
8,188
9,382
11,313
11,714
Application of Funds
Net Block & Capital WIP
3,319
4,744
7,781
9,013
10,920
11,323
Goodwill on Consolidation
50
48
45
118
128
128
Investments
17
9
105
8
21
21
Other Current Assets
10
44
14
92
81
81
Sundry Debtors
0
1
14
14
14
14
Cash and Bank Balance
124
52
52
170
165
215
Loans & Advances
101
91
35
63
69
69
Current Liabilities
190
182
434
514
412
373
Net Current Assets
45
5
(318)
(174)
(83)
5
Other Assets
373
397
575
417
327
237
Total Assets
3,804
5,202
8,188
9,382
11,313
11,714
November 9, 2015
8
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Cash flow statement (Consolidated)
Y/E March (` cr)
FY12
FY13
FY14
FY15
FY16E FY17E
Profit/ (Loss) before tax
23
(47)
(184)
(330)
(270)
(127)
Depreciation & Amortization
22
50
92
141
152
190
Other Adjustments
(22)
(27)
(13)
(27)
(16)
(17)
Change in Working Capital
26
(25)
86
54
104
110
Interest & Financial Charges
72
195
355
526
587
661
Direct taxes paid
(14)
(12)
(12)
(7)
(5)
(5)
Cash Flow from Operations
107
134
325
356
553
813
(Inc)/ Dec in Fixed Assets
(1,323)
(921)
(905)
(1,135)
(2,060)
(593)
(Inc)/ Dec in Invest., Int. recd & Oth. Adj.
(135)
17
(34)
(70)
(134)
0
Cash Flow from Investing
(1,458)
(904)
(939)
(1,206)
(2,194)
(593)
Inc./ (Dec.) in Borrowings
1,480
869
1,037
1,390
1,816
490
Issue/ (Buy Back) of Equity
224
215
68
124
409
0
Dividend Paid (Incl. Tax)
0
0
0
0
0
0
Finance Cost
(281)
(387)
(490)
(549)
(587)
(661)
Cash Flow from Financing
1,423
698
615
965
1,639
(171)
Inc./(Dec.) in Cash
72
(72)
0
116
(2)
49
Opening Cash balances
52
124
52
52
168
165
Closing Cash balances
124
52
52
168
165
215
November 9, 2015
9
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Key Ratios
Y/E March
FY12
FY13
FY14
FY15
FY16E
FY17E
Valuation Ratio (x)
EV/Sales
32.8
23.3
21.5
19.1
11.6
8.0
EV/EBITDA
62.0
39.5
32.9
30.9
17.9
11.9
EV / Total Assets
1.5
1.3
1.0
1.0
0.7
0.7
Per Share Data (`)
Adj. EPS
0.3
(1.5)
(5.0)
(10.1)
(8.0)
(3.5)
Book Value
27.2
31.2
26.4
22.4
27.2
24.4
Returns (%)
RoCE (Pre-tax)
2.5
2.9
2.9
2.6
3.6
5.5
Angel RoIC (Pre-tax)
2.0
2.6
2.6
2.5
3.2
5.5
RoE
1.3
(5.0)
(17.4)
(38.9)
(28.4)
(11.8)
Leverage Ratios (x)
D/E ratio (x)
3.3
3.8
6.0
7.9
8.4
9.9
Interest Coverage Ratio (x)
1.0
0.6
0.4
0.3
0.5
0.8
November 9, 2015
10
Sadbhav Infrastructure Project | 2QFY2016 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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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 Pvt. 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 Pvt. 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 Pvt. Limited endeavors 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.
Neither Angel Broking Pvt. 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 Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Sadbhav Infrastructure Project
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 (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)
November 9, 2015
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