GLOBAL METAL DYNAMICS Ferrous Chinese steel (HRC) export price sustain upward trajectory in September 2020 to ~US$ 517/tonne. (up by 0.4% mom),However the prices are down 8.8% on FY20YTD (April-Oct'20) basis. Chinese crude steel production declined by 2.4%mom to 92.6mnt in September'20, the production for YTD (April-Sep 2020) stood at 550 mn tonnes up 12% YoY. The production surge coupled with rising demand from housing and infrastructure activity supported by raft of economic stimulus measures provided by the Chinese government led to an improvement in Chinese steel output on yearly basis. China recorded iron ore production at 73.4 mnt in Sep'20, down 4.5% MoM, The output for FY20 (April-Sep) recorded ~3% rise to 450mnt. The output on YTD basis picked up amid high Chinese demand. Iron ore prices (CFR China 63% Fe) plunged by 3% on mom basis to US$120/tonne as buying interest weakend among steel players. Australian coking coal (HCC Premium) fell by 7% MoM to $119/tonne as demand sentiments weakened amid growing panic over the impact of possible coal import restrictions in china, the prices are down by 40% on FY20YTD basis. India crude steel production up by 2.6% on mom basis to 8.6mnt on improved capacity utilization and pick up in downstream demand from construction, auto & white goods sector, however the production is down by 3.8% on yearly premises The production for YTD (April-September 2020) stood at 39mnt down by 27% YoY. Domestic steel players continue to increase the steel prices given the pick-up in domestic demand and firm trend in international...
HCC's standalone revenue declined 5.3% YoY to `9.3bn in Q1FY18 (18.8% below estimates) due to slower execution in J&K.; Excluding claims of `800 mn (`770 mn in Q1FY17), core revenue declined 6.1% YoY to `8.5 bn. EBITDA margin expanded 70 bps YoY to 18.3% (239 bps above estimates) due to higher EBITDA margin of 40% vs. 26% on claims recovery. Excluding claims, core EBITDA margin declined 63bps YoY to 16.2%. PAT grew 33.5% YoY to `145mn (47.8% above estimates). We maintain Accumulate' as sharp surge in stock price in last one year have factored in drastic debt...
Cabinet’s approval of NITI Aayog’s measures to revive construction sector would augur well for HCC. Under the new measures approved by the Cabinet Committee on Economic Affairs, government agencies would pay 75 % of the arbitral award amount to the contractors in those cases where the award is challenged. HCC has claims receivables of Rs 31.8 bn in its favor up to Aug 2016 and company expects 75% of the amount (~Rs 24 bn) will be received in near term. We expect the gross debt (~Rs 49 bn in FY16 on standalone level) come down going ahead on account of debt restructuring & claims settlement.
Outlook and Valuation: They increase our earnings estimates for FY17E/18E by 15%/86% on account of reduction in interest cost. The order backlog (including L1) at 5x of TTM sales provides better visibility over the medium term. We believe that better clarity on the core construction business led by increase in profitability and reduction in debt during FY16-18E (net D/E expected to decline to 1.4x in FY18E from 2.6x in FY15) to bode well for HCC. The payment of the arbitration awarded claims by the government will be the key driver of reduction in debt going ahead. We maintain ‘BUY’ with a SOTP target price of Rs 46.
HCC's Q1FY17 profitability was better than estimates on account of higher than expected OPM (driven by higher claims recognition at Rs 600 mn). EBITDA of Rs 1.73bn (-3% YoY) was ~ 5% higher than consensus estimate as the margin stood at 17.6% (vs. est. of 16.5%). However, the net revenue of Rs 9.8bn (+1% YoY) was in-line with estimate of Rs 10bn. Thus, adjusted net profit at Rs 115mn was higher than estimate of Rs 20mn. Gross debt on standalone level stood at Rs 49.5 bn in FY16 which is expected to come down going ahead on account of debt restructuring & claims settlement. We broadly maintain our earnings estimates for FY17E/18E and believe that the recovery in investment cycle with focus on debt reduction would augur well for HCC. Maintain Buy with revised TP of Rs 32.
HCC's Q3FY16 profitability was better than estimates on account of higher than expected OPM which was driven by higher claims recovery amount. EBITDA of Rs 2.3bn (+13.5% YoY) was 26% higher than our estimate as the margin stood at 22.5% (vs. est. of 17.5%).
HCC (Hindustan Construction co. ltd.) has a highly leveraged balance sheet with total consolidated debt of ~ Rs 12000 crore. The company is in infrastructure development business and it is...
HCC's Q2FY16 profitability was better than expected led by higher than estimated margins and exceptional gain through asset sale. EBITDA of Rs 1.8 bn was 23% higher than our estimate as the margin stood at 19.5% (vs. est. of 14.8%) due to higher claims recovery amount.
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).
HCC posted 3.2% YoY decline in Q4FY15 standalone sales to Rs11.2bn (including Rs2.5 bn claims recovery), 17.9% below our expectations of Rs13.6bn. The decline in sales was due to stretched working capital which impacted execution.
HCC has successfully raised Rs4 bn through QIP at a price of Rs30 (Rs29 premium) per share and issued 133.3 mn new shares to the qualified institutions. Post the QIP, the company's equity shares increased to 779.2 mn which resulted in 20.6% equity dilution.
