HCC posted 8.1% YoY decline in Q1FY16 standalone sales to Rs9.1 bn (including Rs1.1 bn claims recovery), 21.5% below our expectations of Rs11.5 bn. The decline in sales was due to slow execution of its key projects Kishanganga hydro project and NH-34 road project. EBITDA margin contracted by 254bps to 17.9% (217bps higher than our expectation of 15.7%), due to higher construction cost (which as a percentage of sales stood at 45.1% in Q1FY16 compared with 42.5% in Q1FY15).