MBL Infrastructure Ltd. share price target

Performance Back on Track; Concerns still Prevail MBL Infrastructures (MBL) has managed to back on track in 3QFY17 following a worst ever performance in 2QFY17. Despite 18% YoY (+52% QoQ) decline in revenue, its operating profit improved by 8% YoY to Rs708mn mainly owing to 295 bps YoY improvement in operating margin to 12.5%. Notably, interest cost witnessed a sharp up-tick (+77% YoY and +93% QoQ) due to rise in working capital loans for which its net profit contracted by 43% YoY to Rs135mn. We have downwardly revised our earnings estimates by ~16% for FY18E mainly to factor in likely revenue loss due to delay in captive HAM projects and surging...

On account of termination of 2 BOT projects (Seoni-Katangi & Garra-Waraseoni with aggregate cost of Rs3.45bn), the Company had to write-off Rs2.20bn incurred for the projects, which resulted in a significant Rs1.8bn operational loss. However, adjusted with terminated contracts, EBITDA stood at Rs401mn (down ~15% yoy) and adjusted EBITDA margins came in at 10.8% (-87 bps yoy). MBL expects Rs21.0bn revenue as against earlier guidance of Rs29.0bn in FY17E....

MBL's revenue grew by ~17% yoy to Rs7.13bn, mainly owing to pick-up in execution of old projects. EBITDA rose by ~15% yoy to Rs746mn and margins came in flat at 10.5% (yoy). Its net profit remained flat on yoy basis at Rs295mn owing to 48% jump in interest cost. Revenue growth is expected to improve further with the commencement of newly bagged Hybrid Annuity Model (HAM) projects, which account for 55% of...

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.

MBL Infrastructures Ltd is engaged in execution of civil engineering projects with specialization in roads and highways. The company provides integrated Engineering, Procurement and Construction (EPC) services for civil construction and infrastructure sector projects. It operates through segments, including Highway Construction, Highway Operations & Maintenance, Highway-BOT (Build, Operate and Transfer) Projects, Housing Infrastructure, Railway Infrastructure, Industrial Infrastructure and Other Infrastructure Projects. It is engaged in...

Topline grew by 11% yoy slightly lower than expectations. EBITDA margins at 7.7% were significantly below expectations of 10% - on lower share of execution on new orders. EBITDA was 30% below expectations....

MBL Infrastructures (MBL) has reported ~11% yoy growth in revenue mainly owing to pick up in execution of new projects. However, absence of margins booking from new projects due to accounting standard led to EBITDA decline of ~19% yoy to Rs472mn way below our estimate of Rs561mn, which also resulted in poor EBITDA margins of ~7.7% (-282bps yoy). Non-booking of margins from new projects has been dragging performance for last two quarters and we believe margins flow from new projects will aid MBL to restore its profitability in ensuing quarters. Notably, MBL has added orders worth Rs36bn (+140% yoy) in FY16, taking its o/s order backlog...

MBL Infrastructures (MBL) reported having won 2 NHAI road projects worth Rs2,126cr on Hybrid Annuity model. The first project entails 4-laning of Chutmultpur-Ganeshpur section of NH-72A to Roorkee-Chutmalpur-Gagalheri section of NH-73, covering a stretch of 53.3kms. MBL won this project at a bid price of Rs942cr, against the NHAI base pri..

booktosales), high working capital (debtor/inventory days of 51/124) and high leverage (1.3x debt:equity). MBL's BOT portfolio too, with only 2/5 projects operational, could add furtherstraintothebalancesheet....

MBL Infrastructures (MBL) exhibited strong execution capabilities in 3Q as revenue stood at Rs6.86bn (+27% yoy and +69% qoq) mainly on account of execution pickup from many of its projects post monsoon and revenue booking from new projects. However, operating profit grew moderately by ~9% yoy to Rs659mn and EBITDA margin stood at ~9.6% (-167bps yoy). An absence of margin booking from new projects led to margins decline. Notably, after seeing insipid order inflow till 1HFY16, MBL has succeeded in adding projects worth over Rs10bn till date in 2HFY16 and expects further addition of projects worth Rs20bn by the end of...

For 2QFY2016, MBL Infrastructures (MBL) reported a 16.8% yoy top-line growth to Rs406cr. The company reported a yoy decline in EBITDA margin to 11.7% for the quarter. During 2QFY2015, MBL had received Rs5cr as escalation amount from the Guwahati project. On adjusting for the same, the EBITDA margin declined 202bp yoy. Fall in yoy EBITDA margin reflects (1) 85.8% increase in other expenses (to Rs29cr) and 82.8% increase in labor and sub-contracting costs (to Rs28cr). The 41.5% yoy increase in employee expenses is mainly on account of induction of new employees into the company in earlier quarters. Despite strong execution, EBITDA decline on a yoy basis percolated to the PAT level; PAT declined by 17.6% yoy to Rs18cr. The Reported PAT margin of the company declined from 6.2% a year ago to 4.4% in 2QFY2016. MBLs unexecuted order book as of 2QFY2016 stands at ~Rs2,150cr (order book to LTM revenues is at 1.0x). With 3 BOT projects expected to commence tolling in FY2016-2017E and Management clarifying that it does not intend to add any new BOT projects to the companys portfolio till FY2017, we are confident that MBLs D/E ratio would peak out in FY2017E at 2.3x. Outlook and valuation:...

The management attributes the high inventory levels to a conscious decision to procure raw material (aggregates, bitumen, and steel) at current low prices. It expectsinventorydaystofallto90100byJune16....

MBL Infrastructures (MBL) reported lower than expected performance mainly on account of insipid order inflow seen in the last one year and seasonal overhang. Top-line grew by ~17% yoy to Rs4.1bn marginally below our expectation of Rs4.2bn. Operating profit declined by ~10% yoy to Rs473mn below our expectation. EBITDA margin stood at ~11.7%. Net profit de-grew by ~17% yoy to Rs177mn, which is below our expectation of ~Rs190mn. Notably, weak order intake has been a setback for MBL over the last 8-12 months as it could add orders worth ~Rs5.5bn only in 1HFY16. Nevertheless, MBL is still maintaining its guidance...

MBL Infrastructures reported better than expected performance mainly on account of sound execution shown by the company. Top-line grew by ~20% yoy to Rs6.1bn as against our expectation Rs5.7bn. Operating profit witnessed a growth of ~22% yoy to Rs647mn way ahead of our expectation of Rs570mn. EBITDA margin remained stable at 10.6%. Net profit grew by ~26% yoy to Rs294mn, which is ahead of our expectation of ~Rs223mn. Notably, a major growth hindrance for MBL in coming time could possibly be sluggish order inflow. Nevertheless, MBL is still maintaining its guidance to add orders worth ~Rs30-35bn in FY16E. Gross...