construction & infrastructure21sep15 -...

Andheri

Airport

Santacruz

Bandra

Mahim

Matunga

Dadar

Prabhadevi

Dardeo

Churchgate

Colaba

Worli

PowaiJogeshwari (W)

CONSTRUCTION & INFRASTRUCTURE

Mumbai metro mission gains momentumSeptember 22, 2015

Nitin Arora Research [email protected] +91 22 66242491

Kushan ParikhResearch [email protected] +91 22 66121431 SECTOR UPDATE

Mumbai Metro Features

Gauge (Nominal) 1435mm

Route length (underground) 32.5 km

No of stations 26

Design speed 90 kmph

Max operating speed 80 kmph

Rolling stock Maximum Axle Load: 17 tonnes

Length of the cars: 21.9 metres

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. Emkay Global Financial Services Ltd.

©

Your success is our success

Emkay

India Equity Research | Construction & Infrastructure

September 22, 2015

Sector Update

Construction & Infrastructure

Mumbai metro mission gains momentum

Adani Ports BUY

CMP Target Price

333 385

Ahluwalia Contracts BUY

CMP Target Price

247 280

Ashoka Buildcon ACCUMULATE

CMP Target Price

164 195

Gujarat Pipavav REDUCE

CMP Target Price

178 176

IL&FS Transportation HOLD

CMP Target Price

95 160

IRB Infrastructure BUY

CMP Target Price

227 310

J Kumar BUY

CMP Target Price

760 800

Larsen & Toubro BUY

CMP Target Price

1,540 1,830

NCC ACCUMULATE

CMP Target Price

67 93

Sadbhav Engineering BUY

CMP Target Price

282 380

Simplex Infrastructure ACCUMULATE

CMP Target Price

293 434

Nitin Arora [email protected] +91 22 66242491

Kushan Parikh [email protected] +91 22 66242431

MMRC (Mumbai Metro Rail Corporation) is all set to award the seven civil construction

packages in the next one month. The total civil packages are estimated to cost around

Rs150-160 bn and each package comprises of 4-5 km long twin tunnel

Issues with respect to Car shed got addressed however package two (Kalbadevi,

Girgaon, Grant road) and four (Dadar area) can face agitation

Each package will be requiring two-three Tunnel boring machines with a condition of one

new TBM in every package, Bidders (barring J Kumar infra) likely to procure TBMs on

operational lease as project size require higher bank guarantees and capex

We believe companies with better financial positions like L&T (has bid for all seven

packages) , J Kumar Infra (has bid for five packages) are well placed to benefit

Mumbai Metro line–III project: Final awarding soon

Five months after the bid submission by the 9 prequalified bidders for the Mumbai metro

phase –III project (Colaba – Bandra –SEEPZ, 33.5 km), MMRC (Mumbai Metro Rail

Corporation) is all set to award the seven civil construction packages in the next one month.

The total civil packages are estimated to cost around Rs150-160 bn and each package

comprises of 4-5 km long twin tunnel. The work is expected to start in by January 2016 and

is targeted to be completed by 2019.

In May 2015 bids from eight consortiums have been received for the 7

packages

M/s. AFCONS Infrastructure Ltd./Kyivmetrobud,

M/s. Continental Engineering Corporation/ITD Cementation India Ltd/Tata Projects Ltd

M/s. DOGUS/SOMA, M/s.

J.Kumar Infraprojects Ltd/China Railway No.3 Engineering Group Co. Ltd,

M/s. Larsen & Toubro Ltd/Shanghai Tunnel Engineering Co. Ltd, M/s.

OSJC Moscow Metrostroy/Hindustan Construction Co. Ltd,

M/s. Pratibha Industries Ltd/Guandong Yuantian Engineering Co and

M/s. Unity Infraprojects Ltd/IVRCL Ltd/China Railway Tunnel Group Co. Ltd.

Financial Snapshot (Consolidated)

EPS EV/EBITDA P/E

(Rs mn) FY16E FY17E FY16E FY17E FY16E FY17E

Adani Ports 11.3 14.0 18.9 15.4 29.5 23.8

Ahluwalia Contracts 12.4 16.1 11.5 8.7 19.9 15.3

Ashoka Buildcon 4.2 6.2 11.0 9.3 39.4 26.3

Gujarat Pipavav 8.8 10.6 17.4 14.7 20.2 16.7

IL&FS Transportation 13.9 17.7 9.5 8.5 6.8 5.3

IRB Infrastructure 17.5 16.8 8.6 7.7 13.1 13.5

J Kumar 35.4 50.2 10.8 8.6 21.4 15.1

Larsen & Toubro 53.8 67.8 18.3 14.7 28.8 22.7

NCC 3.2 5.2 8.1 6.7 20.7 12.8

Sadbhav Engineering 8.4 10.8 15.7 12.5 15.0 16.0

Simplex Infrastructure 16.7 29.4 6.6 5.7 17.5 10.0

Source: Emkay Research Note: Sadbhav Engg. P/E ratio is FY16E/17E implied P/E as we have valued the company on

SoTP basis and estimate only standalone EPS.

Construction & Infrastructure India Equity Research | Sector Update

Emkay Research | September 22, 2015 2

Exhibit 1: Metro UG Packages

Package

Bidders 1 2 3 4 5 6 7

Total Bids

Placed

L&T - Shanghai Tunnel Engg 7

J. Kumar - China Railway No.3 Engg Grp 5

Continental Engg Corp - ITD Cem - Tata

Projects 5

OSJC Moscow Metrostroy - HCC 5

Pratibha Industries - Guandong Yuantian

Engg 3

Afcons Infra - Kyivmetrobud 2

Dogus - Soma 2

Unity Infra - IVRCL - China Railway

Tunnel Grp 1

Total Bidders for each Package 3 4 4 4 5 7 3 30

Source: MMRC, Emkay Research

Car shed issue got addressed

During the planning stage it was proposed that the car shed to park metro coaches will be built

on Aarey Colony land. However due to the protest/agitation MMRC shifted the location of the

depot from Aarey colony to Kanjurmarg.

The state government has moved to High court seeking that a two-decade old stay on 135.70

acres of land in Kanjurmarg be lifted for its Metro 3 project. While around 101 acres would be

used for the car shed, the remaining 34 acres would be used to set up a temporary pre-casting

yard.

Recently the Bombay high court asked the state if it was willing to deposit the compensation

account for over 100 acres of land in Kanjurmarg which it wants for the Metro III project.

The Kanjurmarg land has been under a legal dispute since 1953. The claimants had launched a

second round of litigation in 1996. In 1997, the HC had restrained the state government from

allotting land to the tune of around 400 acres in Kanjurmarg any person, following a legal dispute

over it that dates back to 1953.

The extension to Kanjurmarg from SEEPZ will be an 8km stretch which will be done on an

elevated basis. This will cost INR15‐17bn. MMRDA/state govt will fund the extension on its own

without taking help from JICA.

Package two (Kalbadevi, Girgaon, Grant road) and four (Dadar area) can face agitation

As per discussion with the awarding authority and industry experts, Package two which includes

four underground stations at CST, Kalbadevi, Girgaon, Grant Road and Package 4 which

includes three underground stations at Siddhi Vinayak, Dadar and Shitaladevi might face

agitation as it requires displacement of people.

Issues at Package 2

As per project plans, 26 buildings need to be demolished to make way for the proposed Girgaum

and Kalbadevi stations. Locals are opposed as more than 600 families and over 200 commercial

establishments will be affected.

Issues at Package 4

The MMRDA has issued notices to three buildings - Corner View apartment, Surve House and

Dayalji Apartment in Patilwadi of Dadar (W) near the Shivaji Park playground. All buildings are

over 75 years old.

Out of 200 square metres, 100 sq metres will be acquired permanently. Land is required for

ancillary work of the station and shaft for ventilation.



Requirement of Tunnel boring Machines

As per discussion with the awarding authority and industry experts, each package will be

requiring two- three Tunnel boring machines with a condition of one new TBM in every package

which implies requirement of minimum of 14 TBM’s and maximum of 21 TBMs in the metro

project.

We have seen contractors like L&T, ITD Cementation, J Kumar Infrastructure, Pratibha

Industries, have executed metro projects in Delhi where the underground strata is mostly a

combination of soil and rock whereas Mumbai will require different tunnel boring machines as

the city’s underground strata is very different. However you can modify the horse power of a

TBM but to a certain extent, which costs around Rs80-100 mn. The new TBM will cost around

Rs650 mn - 700 mn.

In Mumbai metro the underground stations will be constructed using other methods such as cut

and cover and the new Austrian tunneling method according to site requirements. The Austrian

tunneling method enables blasting the underground by drilling a small hole on the surface,

keeping it intact, and is useful for underground construction in congested areas.

Bidders (barring J Kumar infra) likely to procure TBMs on operational lease as project size require higher bank guarantees and capex

Given that complexity involved at the project level and on uncertainty on whether the same TBM’s

can get utilised which are currently under operation at Delhi metro project and requirement of

one new TBM in each package will lead to higher capex despite the 10% interest advance

payment from the awarding authority. We believe that the contractors will procure the TBM on

operational lease. Generally TBM;s in Indian market get purchased from Herrenknecht AG

(Germany), The Robins company etc and also from Chinese players (Pratibha industries owns

TBMs manufactured by Chinese players).

The Contractors have to submit performance guarantee of 10%, Advance payment guarantee of

10% and retention money guarantee of 5% which will imply Rs5 bn guarantee which the

company’s banker has to sanction for a project cost of Rs20 bn. This is assuming full guarantee

at the project level though it can be reduced depending on the stake each bidder has in the

consortium.

It is important to note 1% of the commission will be paid on bank guarantee on recurring basis

till the execution life of the project and margin money will have to be given, generally remains in

range of 5-7% of the guarantee amount which will remain blocked till the execution period.



Exhibit 2: Metro Financing

Particulars Value

Project cost (Rs mn) 25000

Contractor share 100%

Financing

Performance guarantee 10%

Advance payment guarantee 10%

Retention money guarantee 5%

Total guarantee to be given 25%

Total amount (Rs mn) 6250

Cash outflow by contractor on guarantee

Commission on total guarantee amount (to be paid till execution) 1%

Margin Money on total guarantee amount 5%

Commission (Rs mn) ( for 4 years) 250

Margin Money (Rs mn) 312.5

Total 562.5

Capex

Assuming one package

Scenario 1

Fresh purchase of TBM

Tunnel boring machine (For new machine) Rs600-650 mn per machine

Additional 2 TBM cost assuming modification Rs200-250 mn

Other capex Rs200 mn

Total cash outflow on capex Rs1000-1100 mn

Scenario 2

Operational lease for TBM

Rental cost for TBMs 10%

Rental Amount for 3 TBMs for 4 years 780

Other capex Rs200 mn

Total (Rs mn) 980

Working capital requirement Rs400-500 mn/year

Cash Inflows

Advance payment 10%

Total amount Rs mn 2500

Payment cycle from MMRC 30 days

Source: Emkay Research, Company



Muck issue: Import factor to be seen during the construction period

According to Environment Impact Assessment Report prepared by RITES , metro phase –III will

generate 54 lakh cubic metre of muck which will require 13.8 lakh square metre of land –an

average four meters deep.

The report suggests that the muck may be used:

For reclamation in the coastal road project

To be transported to quarries in Thane and Raigad districts about 100 km from the city.

The report however points out that entrance roads to a number of these quarries do not

exist and states the 54 lakh cubic metres of muck will have to be transported by trucks to

the nearest proposed jetty.

Truck movement required for transporting the muck/earth will be about 591 truck trips per

day for the entire length. On an average a truck is anticipated to travel about 50km per trip.

Hence, the total distance travelled will be 29,550km per day.

Deep-sea dumping, 100 km from Mumbai's coast, or dumping into the Rohini creek at

Shrivardhan village on the Raigad coast. However we have seen use of dredged sand for

reclamation purposes as alien soil used for reclamation can destroy marine ecology.



How the authority will decide on which basis the packages are to be awarded?

The authority will be awarding no more than 2 packages to a single consortium. We are assuming

a scenario where L&T is L1 in more than 2 packages (packages 3, 5 & 6) and evaluating how it

will award these packages.

Exhibit 3: Assuming L&T is L1 in packages 3, 5 & 6

Package

Bidders 1 2 3 4 5 6 7

L&T - Shanghai Tunnel Engg L1 L1 L1

J. Kumar - China Railway No.3 Engg Grp

Continental Engg Corp - ITD Cem - Tata Projects

OSJC Moscow Metrostroy - HCC

Pratibha Industries - Guandong Yuantian Engg

Afcons Infra - Kyivmetrobud

Dogus - Soma

Unity Infra - IVRCL - China Railway Tunnel Grp

Source: Company, Emkay Research

Exhibit 4: Assumptions of package sizes and L1 and L2 bids

Particulars (in Rs bn)

Package

size L1 Bid L2 Bid L1-L2 Gap % Gap

Lowest TPC

of L1-L2

combined

Package 3 15.00 15.50 16.50 1.00 6.5% 16.50

Package 5 25.00 26.00 28.00 2.00 7.7% 26.00

Package 6 20.00 20.50 21.75 1.25 6.1% 20.50

Total 60.00 62.00 66.25 63.00


Case 1 - Lowest TPC (Total project cost)

In case the Authority intends to award 2 out of the 3 packages, that L&T is L1 in, to L&T and the

remaining package to the L2 bidder at their respective bid costs, then we believe the Authority

will look to award the packages in such a way that the Total Project Cost (TPC) comes out

to be lowest, which in our case would mean awarding Package 3 to the L2 bidder, and awarding

Packages 5 & 6 to L&T (L1) in order to get the lowest possible TPC of Rs63 bn at respective

bids for the combination of these 3 packages.

Case 2 - Lowest % Gap between L1 & L2 bids

In case the Authority intends to award 2 out of the 3 packages, that L&T is L1 in, to L&T at its

bid cost and the remaining package to the L2 bidder at the bid cost of L1 (L&T), then we believe

that the Authority might look at the lowest percentage gap between the L1 & L2 bids, and

award the packages in such a way that the L2 bidder with the lowest percentage gap will

be awarded that package at the bid cost of L1 and the remaining 2 packages will go to the

L1 bidder (L&T). In our case that would mean L&T (L1) would be awarded packages 3 & 5 while

the L2 in package 6 will be awarded that package at the L1 bidder's cost. The logic behind lowest

percentage gap being that the L2 with lowest percentage gap will find it easiest to match the L1's

bid cost.

Moreover it will be interesting to see if the awarding Authority can also look at awarding 2

packages in a contiguous stretch to the L1 bidder and the remaining package to the L2 bidder in

order to reduce execution risk and bring in efficiencies.



Description of the Works

The Mumbai Metro Rail Corporation Limited (MMRC) hereafter “The Employer” intends to pre-

qualify agencies for the following contracts under this project:

1.1 Contract Package MM3-CBS-UGC-01

Ch. : -488 to Ch. : 3762 including four underground stations at Cuffe Parade, Vidhan Bhavan,

Churchgate and Hutatma Chowk and associated bored tunnels together with two tunnel sidings

at Cuffe Parade.

Locations of Stations are:

Cuffe Parade Station: BMC Park (Taj Vivanta)

Vidhan Bhavan Station : In between Nariman Point Fire Brigade Station and

Vidhan Sabha Assembly Hall (Vidhan Bhavan Assembly)

Churchgate Station: Jamshedji Tata Road ( Eros Cinema Hall)

Hutatama Chowk Station: Dadabhai Naoroji Road (Hutatma Statue)


Ch.: 3762 to Ch.: 7811 including four underground stations at CST, Kalbadevi, Girgaon and

Grant Road and associated bored tunnels.

Locations of stations are:

CST Metro Station: Azad Maidan close to Mahapalika Marg (CST Railway Station)

Kalbadevi Station: Jagannath Shankar Sheth Road (Parsi Temple)

Girgaon Station: Jagannath Shankar Sheth Road (Maratha Mandir High School)

Grant Road Station: Dadabhai Bhadkamkar Road (B. Ed. College, Gilger Tank Building)


Ch.: 7811 to Ch.: 12868 including five underground stations at Mumbai Central, Mahalakshami,

Science Museum, Acharya Atre Chowk and Worli and associated bored tunnels.


Mumbai Central Metro Station: Dr. Nair Marg (Mumbai Central Railway Station)

Mahalakshami Metro Station: Sane Guruji Road (Jacob Circle)

Science Museum Station: Dr. E Moses Road (Race Course)

Acharya Atre Chowk Station: Dr. E Moses Road (B.M.C. Office)

Worli Station: Dr. Annie Besant Road (Glaxo SmithKline Building)


Ch.: 12868 to Ch.: 18976 including three underground stations at Siddhi Vinayak, Dadar and

Shitaladevi and associated bored tunnels.


Siddhi Vinayak Station: BMC Ground (Siddhi Vinayak Temple)

Dadar Station: Namdar Gopalkrushna Gokhale Road (Shiv Sena Bhavan )

Shitaladevi Station: Lady Jamshedji Marg (Paradise Cinema)


Ch.: 18976 to Ch.: 23900 including four underground stations at Dharavi, B.K.C. Vidya Nagari

and Santa Cruz and associated bored tunnels together with two tunnel sidings at B.K.C.


Dharavi Station: Mahim Sion Link Road (Dharavi Hutment)

B.K.C Station: B.K.C. Road (Income Tax Office)

Vidyanagri Station:B.K.C. - F Block Road (Uttar Bharat Education Institute)

Santa Cruz Station Western Express Highway (Wakola Flyover)




Ch.: 23900 to Ch.: 28388) including three underground stations at CSIA Domestic Airport,

Sahar Road and CSIA International Airport and associated bored tunnels.


CSIA Domestic Airport Station: CSIA Domestic Airport

Sahar Road Station: Sahar Road (International Airport)

CSIA International Airport Station: International Airport


Ch.: 28388 to Ch.: 32367 including three underground stations at Marol Naka MIDC and

SEEPZ and associated bored tunnels together with a ramp for the depot connection.


Marol Naka Station: Andheri – Kurla Road ( MML1 Marol Naka Station)

MIDC Station: Road No.7 – connecting Krantiveer Akhuji Salve Road(Sr. Police

Colony & Vikroli Village Hutment Area)

SEEPZ Station: Krantiveer Akhuji Salve Marg (SEEPZ Gate No. 1)


©


Emkay


September 22, 2015

Company Update

J Kumar

Well placed

CMP Target Price

Rs760 Rs800 ()

Rating Upside

BUY () 5.3 %

Change in Estimates

EPS Chg FY16E/FY17E (%) NA

Target Price change (%) NA

Previous Reco BUY

Emkay vs Consensus

EPS Estimates

FY16E FY17E

Emkay 35.4 50.2

Consensus 38.6 54.2

Mean Consensus TP Rs 840

Stock Details

Bloomberg Code JKIL IN

Face Value (Rs) 10

Shares outstanding (mn) 32

52 Week H/L 848 / 299

M Cap (Rs bn/USD bn) 24 / 0.37

Daily Avg Volume (nos.) 20,389

Daily Avg Turnover (US$ mn) 0.2

Shareholding Pattern Jun '15

Promoters 51.0%

FIIs 21.7%

DIIs 10.4%

Public and Others 16.9%

Price Performance

(%) 1M 3M 6M 12M

Absolute (2) 28 17 131

Rel. to Nifty - 35 26 140

Relative price chart

Source: Bloomberg Nitin Arora

[email protected]

+91 22 66242491

Kushan Parikh

[email protected]

+91 22 66242431

Kushan Parikh

[email protected]

+91 22 66242431

-10

24

58

92

126

160

300

410

520

630

740

850

Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15

%Rs

J Kumar Infra (LHS) Rel to Nifty (RHS)

Bid for 5 out of 7 packages for Mumbai metro phase –III project, each package requires

3 TBM (Tunnel boring machines) in which one has to be new, the company did not rule

out the possibility of winning 2 packages worth Rs55-60bn

According to our calculation if Jkumar infrastructure wins 2 packages will require bank

guarantees worth Rs10 bn and capex worth Rs1.7 bn, we currently build in one package

from Mumbai metro phase –III project in our estimates

Given the order intake visibility remains strong specially from the metro projects (capital

intensive and requires higher guarantees) and road sector which will increase the future

working capital requirements and capex going forward, the company in our view can look

at raising funds again rather than stretching the balance sheet

We do see upgrade to our FY17E earnings if the company wins two packages of Mumbai

metro phase –III project. We will review our FY17 earnings post the event and any

correction seen in the stock price will be an opportunity to buy

Bid for 5 out of 7 packages for Mumbai metro phase –III project.

For the Mumbai metro project phase –III the company has bid for 5 packages out of total 7

packages. Each package is expected to vary between Rs22-25 bn and, some packages

estimated to cost Rs30 bn (A single company can take/win maximum 2 packages).

Project involves higher bank guarantee and capex

Given that each package requires 3 TBM (Tunnel boring machines) in which companies have

to purchase one new TBM. The company did not rule out the possibility of winning 2 packages

worth Rs55-60bn. The company can modify (to increase the horse power) two of his existing

TBM’s which will make it suitable to work for Mumbai packages. The total cost to be spent on

modification stands at Rs80-100mn per machine.

The 4 tunnel boring machines which are currently getting utilised in Delhi metro, each TBM

will get free from the Delhi project from January 2016 to April 2016. The total capex is

estimated around Rs1.7 bn if the company is able bag two packages of Mumbai metro.

Given that company has always believed that in the long term, leased equipment’s are cost

ineffective, and therefore, ownership and use of modern construction equipment results in

cost savings we believe that company will not procure TBMs on operational lease basis.

According to our calculation if Jkumar infrastructure wins 2 packages will require bank

guarantees worth Rs10 bn against which cash outflow will be towards the commission (Rs100

mn every year) which needs to get paid every year till the execution period and Margin money

(Rs400 mn ) which will remain blocked till the end of the execution period.

Financial Snapshot (Standalone)

(Rs mn) FY16 FY17 FY15 FY16E FY17E

Net Sales 9,773 11,686 13,181 16,052 20,646

EBITDA 1,440 1,876 2,254 2,668 3,415

EBITDA Margin (%) 14.7 16.1 17.1 16.6 16.5

APAT 758 841 944 1,142 1,618

EPS (Rs) 27.3 30.2 29.3 35.4 50.2

EPS (% chg) 11.3 11.0 (3.2) 21.0 41.7

ROE (%) 16.1 15.6 13.8 13.6 16.9

P/E (x) 27.9 25.1 25.9 21.4 15.1

EV/EBITDA (x) 15.5 13.6 12.5 10.8 8.6

P/BV (x) 4.2 3.7 3.1 2.8 2.4


J Kumar (JKIL IN) India Equity Research | Company Update


Given the strong order intake visibility, Company might not look to stretch balance sheet, can explore for raising funds again

Apart from Mumbai Metro Line –III project, order intake visibility remains strong from projects like

DMRC (Noida Metro – Rs20 bn, Delhi Metro Phase IV-Rs100 bn plus) and Mumbai Metro,

Ahmedabad Metro – Rs60 bn (It has won one package of elevated station at Ahmedabad metro

project worth Rs2.78 bn) ) and Nagpur Metro Rs85 bn.

Apart from metro sector the company has also bid for Rs50 bn worth road projects floated by the

Mumbai Municipal Corporation and Rs20 bn worth JNPT NHAI road projects (4 packages). It

has won one package of Rs 5 bn of JNPT NHAI road project, which was won at par with the

NHAI benchmark cost by the company in JV with JM Mhatre infra, the company’s share stands

at Rs3.28 bn.

The company is also eyeing the ambitious Mumbai Coastal Road project worth Rs100 bn which

is expected to come up in 3 phases, the company expects package sizes of Rs5-10 bn on EPC

mode. The project is expected to come up for tendering in 6 months.

The current fund and Non fund based limit stands at Rs5bn (currently Cash Credit (CC) limit

utilised upto Rs3.65 bn) and Rs10 bn (non-fund limit can increase further) for the company.

However the company has strong balance sheet with debt equity ratio of 0.65x but given

the order intake visibility remains strong specially from the metro projects (capital

intensive and requires higher guarantees) and road sector which will increase the future

working capital requirements and capex going forward, in our view the company can look

at raising funds again rather than stretching the balance sheet.

Exhibit 5: Revenue (Rs bn)


Exhibit 6: EBITDA (Rs bn)


Exhibit 7: EBITDA Margin


Exhibit 8: EPS


9.03 9.7711.69

13.18

16.05

20.65

0.00

5.00

10.00

15.00

20.00

25.00

FY

12

FY

13

FY

14

FY

15

FY

16E

FY

17E

1.211.44

1.882.25

2.67

3.41

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

FY

12

FY

13

FY

14

FY

15

FY

16E

FY

17E

13.4%14.7%

16.1%17.1%

16.6% 16.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

FY

12

FY

13

FY

14

FY

15

FY

16E

FY

17E

2427

30 2935

50

0.00

10.00

20.00

30.00

40.00

50.00

60.00

FY

12

FY

13

FY

14

FY

15

FY

16E

FY

17E



Exhibit 9: Debt (Rs bn)


Exhibit 10: Debt/Equity


Exhibit 11: Mumbai metro Phase -III project - Financing

Mumbai metro Phase -III project

Tunnel boring machine required

Minimum 4

Maximum 6

Assuming 2 packages -Capex

Fresh purchase of 2TBMs 1300

Additional 2 TBM cost assuming modification 200

Other capex 200

Total capex 1700

Guarantees to be given (assuming 2 packages)

Project cost 55000

J Kumar share in Consortium 74%

Financing

Performance guarantee 10%

Advance payment guarantee 10%

Retention money guarantee 5%

Total guarantee to be given 25%

Total amount Rsmn 10175

Cash outflow on guarantees given

Commission on total guarantee amount (to be paid till execution) 1%

Margin Money on total guarantee amount 5%

Commission Rsmn ( for 4 years) 407

Margin Money Rsmn (Amount gets blocked for 5 years) 509

Total 916


1.712.36

5.565.15

5.505.95

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00F

Y12

FY

13

FY

14

FY

15

FY

16E

FY

17E

0.13

0.25

0.58

0.55

0.42

0.42

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

FY

12

FY

13

FY

14

FY

15

FY

16E

FY

17E



Key Financials (Standalone)

Income Statement

Y/E Mar (Rs mn) FY16 FY17 FY15 FY16E FY17E

Net Sales 9,773 11,686 13,181 16,052 20,646

Expenditure 8,333 9,810 10,926 13,385 17,231

EBITDA 1,440 1,876 2,254 2,668 3,415

Depreciation 244 348 474 573 597

EBIT 1,196 1,529 1,781 2,095 2,817

Other Income 322 291 382 382 382

Interest expenses 406 576 768 772 802

PBT 1,112 1,243 1,395 1,704 2,397

Tax 354 402 451 562 779

Extraordinary Items 0 0 0 0 0

Minority Int./Income from Assoc. 0 0 0 0 0

Reported Net Income 758 841 944 1,142 1,618

Adjusted PAT 758 841 944 1,142 1,618

Balance Sheet


Equity share capital 278 278 322 322 322

Reserves & surplus 4,756 5,475 7,569 8,550 9,942

Net worth 5,034 5,753 7,891 8,873 10,264

Minority Interest 0 0 0 0 0

Loan Funds 2,363 5,559 5,154 5,503 5,953

Net deferred tax liability 51 71 131 71 71

Total Liabilities 7,449 11,382 13,176 14,446 16,288

Net block 2,089 3,255 4,301 4,378 4,130

Investment 1 23 11 11 11

Current Assets 8,472 11,500 11,978 13,844 17,368

Cash & bank balance 1,119 1,212 1,548 1,266 1,191

Other Current Assets 284 1,890 2,193 2,639 3,507

Current liabilities & Provision 4,134 5,148 3,746 4,420 5,854

Net current assets 4,338 6,352 8,232 9,424 11,513

Misc. exp 9 0 0 0 0

Total Assets 7,449 11,382 13,176 14,446 16,288

Cash Flow


PBT (Ex-Other income) (NI+Dep) 790 952 1,013 1,322 2,015

Other Non-Cash items (63) 73 3 0 0

Chg in working cap 7 (2,000) (1,559) (1,475) (2,165)

Operating Cashflow 1,030 (453) 311 631 471

Capital expenditure (1,280) (2,254) (428) (650) (350)

Free Cash Flow (250) (2,706) (117) (19) 121

Investments 83 (128) (107) 0 0

Other Investing Cash Flow 0 0 0 0 0

Investing Cashflow 405 163 275 382 382

Equity Capital Raised 0 0 1,372 0 0

Loans Taken / (Repaid) 385 3,205 (433) 348 450

Dividend paid (incl tax) (73) (113) (141) (160) (226)

Other Financing Cash Flow (82) (90) (107) 0 0

Financing Cashflow (175) 2,426 (77) (584) (578)

Net chg in cash (20) (118) 81 (221) (76)

Opening cash position 1,139 1,119 1,212 1,548 1,266

Closing cash position 1,119 1,001 1,293 1,327 1,190



Key Ratios

Profitability (%) FY16 FY17 FY15 FY16E FY17E

EBITDA Margin 14.7 16.1 17.1 16.6 16.5

EBIT Margin 12.2 13.1 13.5 13.0 13.6

Effective Tax Rate 31.9 32.3 32.3 33.0 32.5

Net Margin 7.8 7.2 7.2 7.1 7.8

ROCE 22.4 19.3 17.6 17.9 20.8

ROE 16.1 15.6 13.8 13.6 16.9

RoIC 284.5 88.1 56.2 56.6 30.6

Per Share Data (Rs) FY16 FY17 FY15 FY16E FY17E

EPS 27.3 30.2 29.3 35.4 50.2

CEPS 36.0 42.8 44.0 53.2 68.7

BVPS 180.8 206.9 244.9 275.3 318.5

DPS 0.0 0.0 0.0 0.0 0.0

Valuations (x) FY16 FY17 FY15 FY16E FY17E

PER 27.9 25.1 25.9 21.4 15.1

P/CEPS 20.9 17.6 17.1 14.2 11.0

P/BV 4.2 3.7 3.1 2.8 2.4

EV / Sales 2.3 2.2 2.1 1.8 1.4

EV / EBITDA 15.5 13.6 12.5 10.8 8.6

Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0

Gearing Ratio (x) FY16 FY17 FY15 FY16E FY17E

Net Debt/ Equity 0.2 0.8 0.5 0.5 0.5

Net Debt/EBIDTA 0.9 2.3 1.6 1.6 1.4

Working Cap Cycle (days) 120.2 160.5 185.1 185.5 182.5

Growth (%) FY16 FY17 FY15 FY16E FY17E

Revenue 8.3 19.6 12.8 21.8 28.6

EBITDA 18.9 30.3 20.2 18.3 28.0

EBIT 17.0 27.8 16.5 17.6 34.5

PAT 11.3 11.0 12.2 21.0 41.7

Quarterly (Rs mn) Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16

Revenue 3,330 2,955 2,967 3,934 3,546

EBITDA 571 576 530 583 584

EBITDA Margin (%) 17.1 19.5 17.8 14.8 16.5

PAT 229 203 239 273 259

EPS (Rs) 8.2 6.3 7.4 8.5 8.0

Shareholding Pattern (%) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

Promoters 59.2 51.0 51.0 51.0 51.0

FIIs 10.2 17.9 19.5 21.0 21.7

DIIs 4.6 10.4 10.1 10.3 10.4

Public and Others 26.1 20.7 19.4 17.7 16.9


©


Emkay


September 22, 2015

Management Meet Update

ITD Cementation India Ltd.

Margins to improve from CY16

CMP

Rs80

Rating

NOT RATED

Change in Estimates

EPS Chg CY15E/CY16E (%) NA

Target Price change (%) NA

Previous Reco NA

Emkay vs Consensus

EPS Estimates

CY15E CY16E

Emkay - -

Consensus 2.5 6.0

Mean Consensus TP Rs 109

Stock Details

Bloomberg Code ITCE IN

Face Value (Rs) 1

Shares outstanding (mn) 155

52 Week H/L 90 / 39

M Cap (Rs bn/USD bn) 12 / 0.19

Daily Avg Volume (nos.) 47,091

Daily Avg Turnover (US$ mn) 0.1

Shareholding Pattern Jun '15

Promoters 51.6%

FIIs 3.5%

DIIs 23.9%

Public and Others 20.9%

Price Performance

(%) 1M 3M 6M 12M

Absolute (1) 29 13 86

Rel. to Nifty (2) 33 24 90

Relative price chart

Source: Bloomberg Nitin Arora

[email protected]

+91 22 66242491

Kushan Parikh

[email protected]

+91 22 66242431

-20

20

60

100

140

180

100

185

270

355

440

525

Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14

%Rs

ITD Cementation (LHS) Rel to Nifty (RHS)

Meeting highlights

Expects significant increase in the order inflow, currently L1 in orders worth Rs20.4 bn

where ITD Cementation’s share will be Rs14.4 bn. In CY15 the management has

targeted order inflow of Rs50 bn plus including one package of Mumbai metro phase –III

project

The Management however did not rule out the possibility of winning two packages in the

Mumbai metro phase –III project. The company has bid for the Mumbai Metro Phase III

project in consortium where its share stands at 40%. The company is looking to obtain

the TBMs (Tunnel boring machine) on an operational lease and not on the books of the

company itself

Given that 10% of the order books are low margin which will get executed by Q2CY16

and with newer order wins are margin accretive, management expects that EBITDA

margins to rebound to 7%/9% in CY15E/16E.Guides for revenue worth Rs27 bn/Rs35

bn/Rs40 bn in CY15E/16E/17E

Expect order intake momentum to continue

The company has achieved order inflow of Rs26 bn as of YTDCY15 (including Water projects

in Kolkata and Baroda worth Rs2.5 bn total, Piling worth Rs500 mn, Marine Jobs from Adani

worth Rs1.33 bn and order from PSA (Port of Singapore) at JNPT worth Rs21.6 bn) .

The company is currently L1 in orders worth Rs20.4 bn where ITD Cementation’s share will be

Rs14.4 bn.

Rs18 bn order comprises of Establishment of Captive Coal Jetty with unloading facilities

and Pipe Conveyor for 2 x 660 MW Udangudi Supercritical Thermal Power Project at

Udangudi, Thoothukudi Distt., Tamilnadu.

Rs2.43 bn order of development of West Quay - North berth in the inner harbor of

Vishakhapatnam Port

The company also expects orders worth-

Rs2.82 bn as an additional scope from port of Singapore at JNPT port.

Piling order of Rs10 bn in Nigeria.

One package of Rs25-30 bn in Mumbai Metro phase -3 (Prequalified for 2 packages). The

company however did not rule out the possibility of winning two packages in the Mumbai

metro phase –III project. The company has bid for the Mumbai Metro Phase III project in

consortium where its share stands at 40%. The company is looking to obtain the TBMs

(Tunnel boring machine) on an operational lease and not on the books of the company itself.

Financial Snapshot (Consolidated)

(Rs mn) FY16 FY17 CY13 CY14 1HCY15

Net Sales 16,976 16,509 15,841 17,189 13,201

EBITDA 1,668 1,912 1,625 911 830

EBITDA Margin (%) 9.7 11.6 10.3 5.3 6.3

APAT 226 220 93 (761.2) 305

EPS (Rs) 19.6 19.1 8.1 (49.0) 2.0

EPS (% chg) 140.7 (2.7) (57.7) (707.5) -

ROE (%) 6.1 5.6 2.3 4.0 -

P/E (x) 40.9 42.5 100.4 64.0 -

EV/EBITDA (x) 10.1 9.2 8.7 10.2 -

P/BV (x) 2.6 2.4 2.3 2.3 -

Source: Company, Emkay Research Note: Per share data for 1HCY15 reflects the stock split from FV of Rs10 per share to Rs1 per share.

ITD Cementation India Ltd. (ITCE IN) India Equity Research | Management Meet Update


Major recently awarded projects included in order book are:

Dredging and reclamation works for development of 4th container terminal in Jawaharlal

Nehru Port (JNP)-phase-1 worth 21,681 mn from Bharat Mumbai Container Terminals Pvt.

Ltd.

Engineering, Procurement & Construction (EPC) contract for Container Terminal 5 at

Mundra from Adani Port & Special Economic Zone Ltd. Worth 1327 mn.

Providing and Laying 1400mm dia. / 1800mm dia. RCC NP4 class Drainage Gravity line by

Micro-Tunnelling Method from Vadodara Mahanagar Seva Sadan worth 1,211 mn.

Piling Works of 15000 Nos. Piles by Rotary Rigs For 5-10 MTPA Expansion Project at M/s.

JSW Steel Plant at Dolvi, Pen worth 516 mn.

Designing, Providing, Constructing, Erecting, Testing & Commissioning of Intake Channel,

Jackwell & Pump House for Bhama Askhed Water Supply Scheme, Pune worth 447 mn.

Construction of Bose Institute at Salt Lake, Kolkata worth 1,334 mn from Rites Ltd.

Construction of Elevated road at Noida worth 4,155 mn from Noida.

Construction of IIT Ropar worth 2,732 mn from CPWD Ropar.

Rehabilitation and Refurbishment of Water Works at Palta and Garden Reach worth 806

mn from KEIIP.

Design and Construction of reclamation and container yard at JNPT worth 4,067 mn from

Nhava Sheva (I) Gateway Terminal. Construction of LNG storage tanks at Mundra worth

1,113 mn from IHI Corporation.

Exhibit 12: Segmental Order Book breakup as of June 30, 2015


51%

15%

11%

11%

2%4% 0%

6% Maritime Strucutures

Hydro/ Dams/ Tunnels/ Irrigation

Urban Infra Projects/ MRTS

Highways Bridges & Flyovers/Transportation

Industrial Civil Works

Specialist Eng Works

Other - Airports & Waste Water

Buildings



Exhibit 13: Major Tender Prospects

Segments

Value

(Rs mn) Projects

Project Value

(Rs mn)

Marine 32002 Establishment of Captive Coal Jetty with unloading facilities and Pipe Conveyor for 2 x 660 MW

Udangudi Supercritical Thermal Power Project at Udangudi, Thoothukudi Distt., Tamilnadu 25000

Engineering, Procurement & Construction (EPC) Contract for Bulk Berth 3A & 4 & Approach at

Dhamra, Orissa for Dharma Port Co. Ltd. 2000

Contract for Marine facilities of M/s Indian Oil Corporation Ltd. at Ennore Port in the State of Tamil

Nadu 2700

Development of West Quay - North (WQ-7 & WQ-8) berth in the inner harbor of Vishakhapatnam

Port (for left over works) 2302

Urban Infrastructure/MRTS 43891 Detailed Design and Construction of Underground Stations and Associated Tunnels: MM3-CBS-

UGC-04 (Submitted as CEC-ITD-TPL J.V. (40:40:20) from Mumbai Metro Rail Corp. Ltd 40000

Navi Mumbai Metro Trackworks (Installation only) for CIDCO 500

Civil work for bridges, Tunneling work, Excavation, Backfilling, & all civil works of Railway Line

Packages from RattanIndia Nasik Power Limited 2500

Construction of CC Block pavement , PQC pavement , Construction of Drain and development of

approach road from State Highway to MMLH complex at Ahmedgarh Near Ludhiana, Punjab from

Container Corporation of India Ltd.

891

Hydro/Dams/Tunnel/Irrigation 300 Rehabilitation of 150 MW Bhira Rehabilitation of Old Tunnel Project from Tata Power 300

Buildings 8327 Development of Phase 1 Campus including Buildings for IIM Raipur at Naya Raipur 2965

Construction of Married Accomodation, Medical Centre, Shopping Complex, Sports Complex,

Club Building, ESS, Residential Type A, B & C of NIT Meghalaya at Cherrapunji (Meghalaya) 975

Construction Of New Civil Works At Visvesvaraya National Institute Of Technology At Nagpur,

Maharashtra 1787

Construction of Metro Train Depot cum Workshop at Gyaspur on North South Corridor of

Ahmedabad Metro Rail Project Phase 1300

Construction of Hospital Building and ancillaries at Bengdubi in Darjeeling district of West Bengal 1300

Specialist Projects 18657 Various -




Exhibit 1: Revenue CAGR of 4.4% over CY10-14


Exhibit 2: EBITDA CAGR of -10.2% over CY10-14


Exhibit 3: Reported PAT


Exhibit 4: EPS


Exhibit 5: Order Book CAGR of 6.8% over CY10-14


Exhibit 6: Order Inflow CAGR of 4% over CY10-14


14469

16976 16509 1584117189

13201

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

CY10 CY11 CY12 CY13 CY14 1HCY15

1404

1668

1912

1625

911 830

0

500

1000

1500

2000

2500


94

226 220

93

-761

-935-1000

-800

-600

-400

-200

0

200

400


8.1

19.6 19.1

8.1

-49.0

-6.0

-60.0

-50.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0


35366

29070 28911

38210

46011

64714

0

10000

20000

30000

40000

50000

60000

70000


21347

10826

16350

25140 24990 26000

0

5000

10000

15000

20000

25000

30000




Exhibit 7: EBITDA Margins averaged 9.3% over last 5 years


Exhibit 8: Non Cash NWC as a % of sales


Exhibit 9: Debt levels kept rising on working capital requirements


Exhibit 10: Debt equity brought under control


Exhibit 11: ROEs averaged 4.1% over last 5 years


Exhibit 12: ROCEs averaged 10.1% over last 5 years


9.7% 9.8%

11.6%

10.3%

5.3%6.3%

0%

2%

4%

6%

8%

10%

12%

14%


44% 43%

54%56% 55%

26%

0%

10%

20%

30%

40%

50%

60%


5468

6509

7834 7695 7653

6720

0

1000

2000

3000

4000

5000

6000

7000

8000

9000


1.51.7

2.0 1.9

1.3 1.4

0.0

0.5

1.0

1.5

2.0

2.5


2.6%

6.1%5.5%

2.3%

4.0%

0%

1%

2%

3%

4%

5%

6%

7%

CY10 CY11 CY12 CY13 CY14

11.2%

12.9% 12.7%

10.0%

3.9%

0%

2%

4%

6%

8%

10%

12%

14%

CY10 CY11 CY12 CY13 CY14



10% of the order book are slow moving, newly won orders are margin accretive

Given that 10% of the order book remains slow-moving/low margin and further write offs are

expected in some orders which will get executed by Q2CY16 and with newer order wins remains

accretive, management expects that EBITDA margins to rebound to 7%/9% in CY15E/16E.The

management also stated that it is confident of achieving 10% plus margins in CY17E.

Given the accretion in the order book and visibility of new order intake remains strong,

management expects to clock revenue of Rs27 bn/Rs35 bn/Rs40 bn in CY15E/16E/17E. The

JNPT port PSA project contributed Rs2.12 bn to the revenue in Q2CY15 and is expected to

continue to contribute 30-40% to the revenue over the next 2 quarters in CY15E.

Focus on balance sheet improvement to continue

The company’s execution run rate slowed down from CY12 onwards due to disputed/ pending

claims in one of the road projects awarded by the NHAI and irrigation projects in Andhra Pradesh

amounting Rs3.5 bn which led to increase in the working capital.

In Q1CY15 the company has received lump sum payment from NHAI of Rs1.83 bn and has

taken write off worth Rs1.23 bn. With regards to pending claims amounting to Rs1 bn tied up

with the Andhra Pradesh government for 2 irrigation projects, the company has filed a case in

court and is also pursuing out of court negotiations with the authorities to settle the claims. The

initial indications are positive and if both parties settle on a number agreeable to both then the

matter could conclude by year end.

The company sees debt staying stable at the current levels for the rest of the year, while it does

not expect debt to grow further; it also does not envisage any repayment this year as operating

cash flows are not yet strong enough to support debt repayment. Consolidated debt was at

Rs6.72 bn as of June2015 versus Rs7.65 bn at end of March 2015. Standalone debt stands at

Rs5.70 bn as of Jun2015 versus Rs6.71 bn at end of March2015. The interest cost for the

company as of now stands at 12.1% down from 13.2% in CY14. The company expects average

borrowing costs to come down further in CY16E.

With respect to capex , the company expects to incur capex worth Rs200 mn plus in CY15E and

Rs250 mn in CY16E however including Mumbai metro project (one package) will not increase

capex significantly (can increase capex by Rs120-150 mn) as TBMs will be taken on operational

lease.

Exhibit 13: Net Working Capital Days

Net Working Capital (DSO) CY11 CY12 CY13 CY14 1HCY15

Inventories 181 211 220 240 153

Trade Receivables 81 80 93 94 76

Loans and Advances 43 39 50 51 59

Total Current Assets 305 330 363 385 288

Current Liabilities 145 131 154 179 189

Provisions 3 3 4 4 3

Net Working Capital Days 157 196 206 202 96




Parentage help in prequalification

ITD Cem is a subsidiary of Thailand-based Italian Thai Development Public Company Ltd, which

holds 52% stake in ITD Cem. Italian-Thai Development Company Limited is the largest

construction company in Thailand (~41% market share) and one of the largest in South East

Asia. The parent company also provides its knowhow, technologies and skilled personnel to ITD.

ITD-Parent is one of the leading infrastructure company based in Thailand. Some of the marquee

projects executed by ITD-Parent include:

Bangkok’s first underground mass transit system comprising of 10.5 km of twin tunnels, 9

underground stations.

Bangkok Mass Transit System - The train systems for this 23 kms project was provided by

Siemens and the whole project was managed by the Siemens ITD Consortium.

Suvarnabhumi International Airport – capacity of 45 mn passengers

Several Dams and tunnels - completed 7 major dams and more than 30 km of large

diameter tunnels in Thailand.

ITD-parent also helps the ITD cementation for pre-qualification requirement in specifically Marine

segment and several other verticals of infrastructure segments. Since 2005, ITD has entered

into 3 separate JV’s with its parent to build for projects in Roads, MRTS, Water and Airport

sectors.

Exhibit 14: Corporate Structure


ITD Cementation India Limited

Engaged in marine works, highways & bridges, metros, airports, hydro-tunneling, dams & canals, water & sewage and specialist foundation engineering projects.

ITD Cem Maytas Consortium

Design and execution of water conveyor system

ITD Cemindia JV

Construction for road projects

ITD-ITDCem JV

Construction for MRTS and water projects

ITD-ITDCem JV (Consortium of ITD-ITD

Cementation)

Construction of integrated passenger terminal building at Netaji Subash Chandra Bose International airport

95% 80% 49% 40%



Exhibit 15: Joint Ventures

ITD-ITD Cem JV

ITD-ITD Cem JV

(Consortium of ITD-ITD

Cementation)

ITD Cem Maytas

Consortium ITD Cem india JV

Shareholders ITD Cem – 49%

ITD (Thailand) – 51%

ITD Cem – 40%


ITD Cem – 95%

Maytas – 5%

ITD Cem – 80%


Key projects Supply and installation of track work for

Bangalore Metro (to be commissioned in

37 months)

Construction of integrated

passenger terminal building

at Netaji Subas Chandra

Bose (International) airport in

Kolkata

Design and execution of

water conveyor system for

government of Andhra

Pradesh

MP2 road: 35 kms stretch

connecting Jhansi and

Shivpuri

Construction of 3 under ground stations

and tunnels for Kolkata Metro

RJ-4: construction of bypass

on NH-76 at Kota

Design and construction of elevated

viaduct including entry exit line, ramp to

depot, and elevated stations for DMRCL

(CC26) worth 5,460 mn

Recently secured contract of Design and

Construction of Tunnels by Shield TBM

under Delhi MRTS Project for DMRCL

(CC32) worth 7,520 mn

Procurement of Ground Water Treatment

Plants

Design, Construction, Supply, Installation,

Commissioning including Mechanical &

Electrical Equipment and Operation in

Agartala worth 399 mn

Laying of Water Trunk Main from Garden

Reach Water Works to Taratala Valve

Station and Laying of Sewer Line along

Diamond Harbour Road by Microtunelling

Method for KEIIP worth 1,459 mn

Contract value Rs25786 mn Rs19261 mn Rs6632 mn Rs4435 mn

Work in hand as

on June 30,

2015

Rs7002 mn Rs51 mn Rs5748 mn Rs831 mn




Exhibit 16: Brief History

Year

1931 – 1978 The Cementation Company Limited, U.K, a member of Trafalgar House Group, operated a branch in India

In 1978, the branch office was converted into India subsidiary (named as Cemindia Company Limited) of The Cementation Company Limited, U.K,

1994 Cemindia Company Limited renamed as Trafalgar House Construction India Limited to reflect relationship with its then parent

1996-98 Kvaerner ASA acquired Trafalgar House Plc in 1996

Cemindia Company Limited changed its name to Kvaerner Cementation India Limited

2000-01 Skanska AB acquired Kvaerner Construction Group Limited

Kvaerner Cementation India Limited changed its name to Skanska Cementation India Limited

2004-05 ITD, acquired Skanska AB interest in Skanska Cementation India Limited

Skanska Cementation India Limited changed its name to ITD Cementation India Limited

2006-11 Raised Rs. 564 mn through rights issue in October 2006 (fully subscribed by parent)

Raised Rs. 2,447 mn through rights issue in December 2007 (partially subscribed by parent due to regulatory compulsions)

Entry into MRTS and airport segments with support from parent

2012 Construction of Impounded Wet Basin at Mazagon Dock, Mumbai and Dry Dock in GRSE, Kolkata

Construction of double tier elevated structure for Jaipur Metro

2013 Construction of modernized integrated passenger terminal at Kolkata Airport

Entry in Industrial Segment


Exhibit 17: Segment Competitor Presence

Segment Main Competitors

Marine structures Afcons, Simplex, Mann Engineering, Navyuga, Samsung,

Hyundai, Vijay Nirman

Specialist works- Piling & Foundation Simplex Infra, Simlex Projects, Valecha, L&T

Industrial Simplex, JMC, L&T, IVRCL, McNally Bharat, Ramky

Hydro, Dams &Tunnels Patel Engineering, HCC, Gammon, JP, Soma, NCC, L&T, Unity

Airports Consolidated Construction, L&T, BL Kashyap, NCC, Punj Lloyd,

Ramky

MRT L&T, Simplex, Gammon, CEC-CICI, IJM, Welspun, IL&FS

Highways & Bridges GMR, Ramky, L&T, IL&FS, IRB, Gammon, HCC,

Water & Sewage IVRCL, Pratibha, NCC, L&T, Thermax, Jindal, KSB


Exhibit 18: Equipment List

Equipment (Excluding JV Assets) Number of units

Hydraulic and rotatory rigs 38

Cranes 34

Excavators 39

Crushers 3

Batching plants 34

Sensor Pavers 8

Hot Mix Plants 4

Hydraulic RCD Rig 1

TBM 2

Cantilever Gantry 6

Launching Segment Girder 3

Total 172




Key Financials (Consolidated)

Income Statement

Y/E Dec (Rs mn) FY16 FY17 CY13 CY14 1HCY15

Net Sales 16,976 16,509 15,841 17,189 13,201

Expenditure 15,308 14,597 14,216 16,279 12,371

EBITDA 1,668 1,912 1,625 911 830

Depreciation 420 506 442 427 214

EBIT 1,247 1,405 1,183 484 617

Other Income 94 100 340 185 124

Interest expenses 1,060 1,195 1,283 1,355 729

PBT 282 311 239 (686) 12

Tax 56 91 146 75 (292)

Extraordinary Items 1 3 1 (955) (1240)

Minority Int./Income from Assoc. 0 0 0 0 0

Reported Net Income 227 223 94 194 (935)

Adjusted PAT 226 220 93 (761) 305

Balance Sheet

Y/E Dec (Rs mn) FY16 FY17 CY13 CY14 1HCY15

Equity share capital 115 115 115 155 155

Reserves & surplus 3,697 3,890 3,969 5,523 4,585

Net worth 3,812 4,005 4,084 5,678 4,740

Minority Interest 0 0 0 0 0

Loan Funds 6,509 7,834 7,695 7,653 6,720

Net deferred tax liability (126) (177) (212) (149) (482)

Total Liabilities 10,194 11,662 11,567 13,183 10,978

Net block 2,287 2,297 2,236 3,385 3,320

Investment 0 0 0 0 0

Current Assets 14,562 15,292 16,089 18,413 18,777

Cash & bank balance 379 368 319 272 1,148

Other Current Assets 6,361 7,477 7,533 9,023 7,533

Current liabilities & Provision 6,892 6,066 6,825 8,615 11,120

Net current assets 7,670 9,225 9,264 9,798 7,055

Misc. exp 0 0 0 0 0

Total Assets 10,194 11,661 11,567 13,183 10,978



Key Ratios

Profitability (%) FY16 FY17 CY13 CY14 1HCY15

EBITDA Margin 9.8 11.6 10.3 5.3 6.3

EBIT Margin 7.3 8.5 7.5 2.8 4.7

Effective Tax Rate 19.8 29.3 61.1 22.0 (24.0)

Net Margin 1.3 1.3 0.6 1.1 2.3

ROCE 12.9 12.7 10.0 3.9 -

ROE 6.1 5.5 2.3 4.0 -

RoIC 14.0 13.6 10.6 7.4 -

Per Share Data (Rs) FY16 FY17 CY13 CY14 1HCY15

EPS 19.6 19.1 8.1 (49.0) 2.0

CEPS 56.1 63.0 46.5 (21.5) 3.3

BVPS 330.9 347.6 354.5 365.9 30.54

DPS 2.0 2.0 1.0 0.0 0.0

Valuations (x) FY16 FY17 CY13 CY14 1HCY15

PER 40.9 42.5 100.4 64.0 -

P/CEPS 14.3 12.7 17.3 20.0 -

P/BV 2.6 2.4 2.3 2.3 -

EV / Sales 0.9 1.0 1.1 1.2 -

EV / EBITDA 9.4 8.9 10.4 22.0 -

Dividend Yield (%) 0.2 0.2 0.1 0.0 -

Gearing Ratio (x) FY16 FY17 CY13 CY14 1HCY15

Net Debt/ Equity 1.6 1.9 1.8 1.3 1.2

Net Debt/EBIDTA 3.7 3.9 4.5 8.1 -

Working Cap Cycle (days) 156.8 195.8 206.1 202.1 96.5

Growth (%) FY16 FY17 CY13 CY14 1HCY15

Revenue 17.3 (2.8) (4.0) 8.5 -

EBITDA 18.8 14.6 (15.0) (43.9) -

EBIT 26.6 12.7 (15.9) (59.1) -

PAT 136.2 (1.6) (57.7) (918.0) -

Quarterly (Rs mn) Q2CY14 Q3CY14 Q4CY14 Q1CY15 Q2CY15

Revenue 4,164 4,078 5,141 5,877 7,323

EBITDA 292 152 207 321 509

EBITDA Margin (%) 7.0 3.7 4.0 5.5 6.9

PAT (24) (220) (415) 273 32

EPS (Rs) (2.1) (17.3) (26.8) 1.8 0.2

Shareholding Pattern (%) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

Promoters 51.6 51.6 51.6 51.6 51.6

FIIs 3.0 3.4 3.4 3.4 3.5

DIIs 23.7 23.0 24.0 24.0 23.9

Public and Others 21.8 21.9 20.9 20.9 20.9



DISCLAIMERS AND DISCLOSURES: Emkay Global Financial Services Limited (CIN-L67120MH1995PLC084899) and its affiliates are a full-service, brokerage, investment banking, investment

management and financing group. Emkay Global Financial Services Limited (EGFSL) along with its affiliates are participants in virtually all securities trading markets in India. EGFSL was established in

1995 and is one of India's leading brokerage and distribution house.EGFSL is a corporate trading member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited(NSE),

MCX Stock Exchange Limited (MCX-SX).EGFSL along with its subsidiaries offers the most comprehensive avenues for investments and is engaged in the businesses including stock broking (Institutional

and retail), merchant banking, commodity broking, depository participant, portfolio management, insurance broking and services rendered in connection with distr ibution of primary market issues and

financial products like mutual funds, fixed deposits. Details of associates are available on our website i.e. www.emkayglobal.com

EGFSL is registered as Research Analyst with SEBI bearing registration Number INH000000354 as per SEBI (Research Analysts) Regulations, 2014. EGFSL hereby declares that it has not defaulted

with any stock exchange nor its activities were suspended by any stock exchange with whom it is registered in last five years, except that NSE had disabled EGFSL from trading on October 05, October

08 and October 09, 2012 for a manifest error resulting into a bonafide erroneous trade on October 05, 2012. However, SEBI and Stock Exchanges have conducted the routine inspection and based on

their observations have issued advice letters or levied minor penalty on EGFSL for certain operational deviations in ordinary/routine course of business. EGFSL has not been debarred from doing business

by any Stock Exchange / SEBI or any other authorities; nor has its certificate of registration been cancelled by SEBI at any point of time.

EGFSL offers research services to clients as well as prospects. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject

company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

Other disclosures by Emkay Global Financial Services Limited (Research Entity) and its Research Analyst under SEBI (Research Analyst) Regulations, 2014 with reference to the subject

company(s) covered in this report-:

EGFSL or its associates may have financial interest in the subject company.

Research Analyst or his/her relative’s financial interest in the subject company. (NO)

EGFSL or its associates and Research Analyst or his/her relative’s does not have any material conflict of interest in the subject company. The research Analyst or research entity (EGFSL) have not been

engaged in market making activity for the subject company.

EGFSL or its associates may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report.

Research Analyst or his/her relatives have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research

Report: (NO)

EGFSL or its associates may have received any compensation including for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EGFSL or its

associates may have received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EGFSL

or its associates may have received any compensation or other benefits from the Subject Company or third party in connection with the research report. Subject Company may have been client of EGFSL

or its associates during twelve months preceding the date of distribution of the research report and EGFSL may have co-managed public offering of securities for the subject company in the past twelve

months.

The research Analyst has served as officer, director or employee of the subject company: (NO)

EGFSL and/or its affiliates may seek investment banking or other business from the company or companies that are the subject of this material. Our salespeople, traders, and other professionals may

provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses

may make investment decisions that may be inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other

things, may give rise to real or potential conflicts of interest including but not limited to those stated herein. Additionally, other important information regarding our relationships with the company or

companies that are the subject of this material is provided herein. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any

locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject EGFSL or its group companies to any

registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument

or as an official confirmation of any transaction to any U.S. person. Unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may

be distributed in Canada or used by private customers in United Kingdom. All material presented in this report, unless specifically indicated otherwise, is under copyright to Emkay. None of the material,

nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of EGFSL . All trademarks, service marks

and logos used in this report are trademarks or registered trademarks of EGFSL or its Group Companies. The information contained herein is not intended for publication or distribution or circulation in

any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read

“Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report

includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.

www.emkayglobal.com

Emkay Global Financial Services Ltd.

CIN - L67120MH1995PLC084899

7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India

Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com

Emkay Rating Distribution

BUY Expected total return (%) (Stock price appreciation and dividend yield) of over 25% within the next 12-18 months.

ACCUMULATE Expected total return (%) (Stock price appreciation and dividend yield) of over 10% within the next 12-18 months.

HOLD Expected total return (%) (Stock price appreciation and dividend yield) of upto 10% within the next 12-18 months.

REDUCE Expected total return (%) (Stock price depreciation) of upto (-) 10% within the next 12-18 months.

SELL The stock is believed to underperform the broad market indices or its related universe within the next 12-18 months.

construction & infrastructure21sep15 -...

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