Sadbhav Engineering Ltd. share price target

2 July 2019 Sadbhav Infrastructure Project Limited (SIPL) has entered into a definitive agreement with Indinfravit for the sale of its entire equity holding in nine of its operational road projects at an enterprise value of INR66.1b. SIPL has an equity investment of INR15b in these nine projects against which it will receive equity value of INR25.5b, thus valuing the deal at 1.7x its investment. The deal will also help to deleverage the balance sheet by reducing debt to the tune of INR40.6b. Further, there is also a ROFO option with IndInfravit with respect to all future operational assets of SIPL. The cash inflow of INR19b (post tax inflow of INR18.8b) will help SIPL achieve the twin objectives of a lean balance sheet and funding of under construction/new projects. The balance will be utilized to fund SIPLs 12 under construction HAM projects, whose total equity requirement stands at INR13.

Sadbhav Engineering Limited (SEL) has received a credit rating downgrade for its Rohtak-Hisar project (executed under Sadbhav Infrastructure Project Limited, SIPL) on account of delay in debt servicing. The project commenced tolling (FY2019 tolling revenue of Rs. 65 crore) since July 2016, which has not been sufficient enough for debt obligations (interest plus principal payment, Rs. 110 crore for FY2019). SIPL has infused Rs. 277 crore, including equity in the project till FY2019, and has been intimating NHAI about the presence...

Order book at strong | 11,227.7 crore as of Q4FY19 SEL's order book (OB) was at | 11,227.7 crore as of Q4FY19, implying an order book-to-bill ratio of 3.2x on FY19 revenues. BOT/HAM and EPC divisions make up 81.3% of the OB, followed by irrigation (3.4%) and mining division (15.3%). Currently, highway sector remains the priority for bidding projects for the company. The management expects bidding activity to start in the coming months and expects to receive order inflows to the tune of | 6,000-8,000 crore depending on opportunities lined up ahead....

appointed dates for 31% of its order book: SEL has a strong order book of Rs. 11,981 crore which is 3.4x its FY2019 standalone revenue. However, 31% of its order book worth Rs. 3,728 crore (five projects) in which the company is awaiting the appointed dates for four projects (Rs. 3,352 crore). The company is expecting appointed dates for the same post monsoon. Further, from...

Operational performance below expectation: Revenue declined 7.5% YoY to INR10.2b (our est. INR12.7b), while EBIDTA inched up 2% YoY to INR1.3b (our est. INR1.4b). Operating margin of 12.4% (+120bp YoY) was above our est. of 11.0%. Adj PAT declined 59% YoY to INR286m, below our est. of INR741m impacted by higher-than-estimated tax rate (65% v/s est. of 12%)...

Sadbhav Engineering's (SADE) Q4FY19 revenue declined 8% YoY and missed estimates due to a slowdown in execution of HAM projects and delayed award of appointed dates (AD) for newer contracts. EBITDA margins remained healthy, rising 120bps YoY to 12.4% but reported PAT nosedived 59% YoY due to a steep rise in tax rate to 65%. We downgrade our FY20 EPS estimate by 13% to incorporate delayed ADs and lower order inflows, while raising FY21...

Well poised for strong execution for FY2020: SEL's order book of Rs. 12,872 crore (3.5x its TTM revenue) had ~61% un-executable order book during Q3FY2019. However, four projects worth Rs. 3,737 crore commenced construction from December 2018 to January 2019. One project worth Rs. 1,125 crore is expected to start construction by the end of March 2019, and four...

We met the management of Sadbhav Engineering and discussed the company's asset monetization plans and improvement in its order book. Also, the company's working capital cycle has normalized.

ICICI Securities Ltd | Retail Equity Research Sadbhav Engineering (SEL's) topline de-grew 1.0% YoY to | 925.5 crore (our estimate: | 969.7 crore) possibly due to muted execution EBITDA margin rose 68 bps YoY to 12.0% (our estimate: 12.6%) Net profit de-grew 9.0% YoY to | 56.3 crore (our estimate: | 66.6 crore) on account of topline de-growth and higher tax rate (20% in Q3FY19 vs. | 2 crore tax rebate in Q3FY18). However, at PBT level, it grew 17.6% YoY to | 70.3 crore (our estimate: | 70.1 crore...

We maintain BUY with a reduced TP of Rs Rs 418/sh (vs Rs 449 earlier). SADE has posted a decent execution recovery to Rs 9.3bn (in line with estimate) after a muted 1HFY19 which had witnessed a 2% YoY revenue de-growth. EBITDA came in line with guidance at 12%. APAT came in 9% below estimate largely due to higher effective tax rate of 20%.