Consolidated Construction Consortium Ltd - Q1FY11 Result Update

Consolidated Construction Consortium Ltd - Q1FY11 Result Update

Result Highlight – Below Unicon’s expectation

Ø        Revenue of INR 5,080Mn was higher by 23% on YoY basis (against our expectation of INR 5,268Mn). While operating profit at INR 411Mn was higher by 36% on YoY basis, company disappointed on margin front.

Ø        The operating profit margins for the quarter under review were 8.1% against our estimate of 9.7%. This was owing to higher operating cost and staff cost, +33% and +30% respectively on YoY basis. Selling and distribution cost rose to INR 346.9Mn compared to INR 272Mn during same quarter last year, rise of 27% on yearly basis.

Ø        Higher depreciation cost at INR 28.67Mn (+33% YoY) and interest cost at INR 105.5Mn (+191% YoY) dragged the net profit margin. The higher interest out go was due to higher working capital requirements.

Ø        Consequently, Profit after tax at INR 188Mn, was marginally higher by 6% on yearly basis whereas the net profit margin stood at 3.7% compared to 4.3% during same period last year, marginally down by 59bps.

Order-book and Other Updates

During Q1FY11, company bagged several orders worth INR 17,056.9Mn which includes the construction of Goa Airport, Elevated stations for Chennai Metro and Power Plants. The current order-book of the company stands at INR 45,269.4Mn. The current order-book is 2.3x its FY10 revenue. Of the total order-book, ~53% is in Infrastructure segment, and remaining 47% is into realty segment catering to the need of residential (~3%), commercial (35%) and Industrial (9%). The average execution cycle of the current orderbook is about 18-20 months.

CCCL has formed a JV with Edac Energy for execution of power project order from Meenakshi group and also formed a subsidiary namely CCCL Power Infrastructure Services to cater to future BoP (Balance of Plants) projects.

Valuation

At the CMP of INR 83/share, CCCL trades at 10.6x its FY12e consensus earning per share of INR 7.8. Maintain Hold for lower price objective of INR 90/-. Key trigger for stock would be higher order-inflow and ramp up in projects execution.