Extremely high volatility in the stock over last two months: MBL Infra’s stock has been highly volatile over the last few months. The stock lost 49% of its value in the month of August 2016 – after having lost 48% over the preceding eleven months. However, over the last one week, the stock has gained 46%, on the back of five consecutive upper circuits – this was after the stock suffered three consecutive lower circuits. Amidst all this volatility, the stock is down 62% in the last twelve months. We believe deteriorating financials, corporate governance issues and high promoter pledging are responsible for this highly volatile stock price movement.
Outlook and valuation : Phillip Capital have been, and remain, concerned about the growth prospects of MBL, given its weak orderbook (1.8x book-to-sales), high working capital (debtor/inventory days of 113/116) and high leverage (1.2x). Its BOT portfolio too, with only 2/5 projects operational and two HAM projects recently won, will certainly add further strain to the balance sheet. Amidst the recent high volatility in the stock price, high promoter pledge leading to highly unstable state and deteriorating financials – see multiple factors, other than fundamentals, impacting the stock price. Hence, we suspend our rating on the stock and put the stock “Under Review”. They will maintain passive coverage, keeping a keen eye on the developments and resume our coverage as soon as clarity emerges on the aforementioned issues.