punj report12111pdf

7/29/2019 punj report12111PDF

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PUNJ LLOYD LTD

CMP: 52.10 TARGET PRICE: 49.99 EXIT

COMPANY DATA

Particulars

Market cap (Rs cr) 1758.45

Outstanding equity shares(cr) 33.20

52 week high /low(Rs) 64.10/39

2-monthaverage daily volume 6136000

FINANCIAL SNAPSHOTS

Particulars FY12 FY13E FY14E

Sales(Rs mn) 103.13 113.20 127.26

Growth (%) 31 10 12

Adj net inc(Rs mn) 910 210 240

Growth (%) (2.7) (.76) .12

p/e(x) 53.48 52.17 68.48

ROE (%) 4 2 2

SHAREHOLDING PATTERN

% march -12

Promoters 37

FIIS 9.78

Bank & FIs 6.75

Public NIL

STOCK PERFORMANCE

Returns

(%)

CMP 1mth 2mth 3-mth

Punj

Lloyd52.10 (.05) .30 (.0018)

Nifty 5597 .0038 .0019 (.05)

BSE CODE -532693

NSE CODE -Punj Lloyd

TANUJ KUMAR

91-8103260263

[email protected]

INVESTMENT RATIONALE

Punj Lloyd is on the way of recovery since economic crisis

During this phase the company is severely tested by severa

extraneous factors other than market conditions. In 2011-12

the Company has done well in this highly competitive

business environment. Punj Lloyd has been successful in

growing its order book was 2.6 times the revenue of 2011-12

And, there has been a positive swing in terms of revenue

growth and profitability. The total order inflows was Rs 13817 crore in 2011-12 taking

the total order backlog by the end of 2011-12 to Rs 27276cr

Punj has indicated sustained order inflow momentum in

ensuing quarters on back of pick-up in capital spends in

hydrocarbon and social infrastructure sectors in the Middle

East.

In a short span of time, Punj Lloyd Infrastructure Limited

(PLIL), the subsidiary that is focused on the developmen

business has built an asset portfolio worth around Rs. 2,100crore.

Sembawang engineers limited one of the profitable subsidiary

of punj Lloyd doing well focusing on specialized area o

mega infrastructure with extensive presence in all over the

world with increased revenue registering record profit before

tax of $ 57.9 million in 2011-12.

Currently punj Lloyd also wins its first offshore project in the

Middle East Project worth Rs 314 crores ($ 57.75 million) in

Saudi Arabia

KEY CONCERN Increasing interest rates and absence of fixed annual sharing

mechanism for recoveries and untimely cash payouts from the

government adversely affect the profitability and workingcapital management of the company.

High crude oil prices and weak rupee in term of US dollar

resulted in reduction in investment cycle of the company.

VALUATION

Using the discounted cash flow analysis FCFF We achieved

intrinsic value of Rs 49.99 exit. We have a target price of

49.99 for the company, at which the stock would trade at

16.28 x on FY13-14e EPS. We initiate coverage on exit and

target price of 49.99 an downside of 4% from the current

level.

INITIATING COVERA


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Extensive experience indiverse Area ofinfrastructure development

COMPANY OVERVIEW

Punj Lloyd provides integrated design, engineering, procurement, constructionand project management services in the energy and infrastructure sectors. With

operations spread across the middle east, Africa, the Caspian, and Asian pacificand south Asia. Punj Lloyd provides EPC services in oil & gas, process, civilinfrastructure, and thermal power. Further punj Lloyd is today a diversified

conglomerate, owing to its successful foray into aviation, defense and upstream,through its subsidiaries and joint ventures. The company has worked on projects forinternational energy majors such as ADNOC, British Petroleum, Cairn Energy,

Pertamina, Petrokazakhstan, Petroleum Development Oman, Shell, Total andTengizchevroil as well as energy majors in India such as BPCL, CPCL, DahlPower Company, Essar Refineries, GAIL, Gujarat Gas, HPCL, IOC, Jindal

Power, Kochi Refineries, Nuclear Power Corporation, OIL, ONGC, RIL, NHAIand DMRC. As reflection of the international quality standards, construction and

project management techniques As a reflection of the international quality

standards, construction and project management techniques, Punj Lloyd holdsISO 9001:2008,ISO 14001:2004 and OHSAS 18001:2007 certification.

BUSINESS SEGMENT

Commercial and residential building

Industrial structure

Airports

InfoTech park

Hospitals

Hotel

Stadium and sports complex

Industrial projects

Land system

Defense

aviation

Fabrication

Production of

aero structure

Maintenance

and repair of

weapon

Oil and

gas

Petchem

Pipeline

Tankage

andterminals

Therma

power

Nuclear

power

CIVIL CONSTRUCTION AND DEFENCE ENERGY POWER

PUNJ LLOYD


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With unexecuted order book of 2.6 times of the revenue 2011-12 with 39% order book from south Asiaand 23% from Asia pacific in which 37% is from building and infrastructure projects.

In Punj Lloyds

Portfolio, with a share of

65% in revenues and 63% inunexecuted order book.

ENERGY

Largest vertical in punj Lloyd portfolio with 65% inrevenue and 63% in unexecuted order book mainly spread across south

Asia, south east Asia and middle east and Africa Also bagged the Myanmarchina oil and gas pipeline project comprising 183 Kms of oil pipeline and205 kms of gas pipeline .Company offshore order book is very robust in2011-12 they bagged Rs 14000 cr new orders from India south east andAsia region.

FINANCIAL DETAILS OF E NERGY VERTICALS (IN CR)Oil and gas Offshore Power Total

Revenue 5113 639 1260 7012

% of the total 48% 6% 11% 65%

Order backlog 12619 1296 3272 17187

% of the total 46% 5% 12% 63%

OIL AND GAS

Punj Lloyds oil and gas business focuses on onshore field development

projects, pipelines including offshore pipelines, process plants, and tanksand terminals. Within the process plants business, the Company also catersto the chemicals and petrochemical industry.

ORDER BACKLOG OF OIL AND GAS SECTOR (I N CR)

pipelines Tanks

&terminals

Process

plants

total

Revenue 2565 933 1615 5113

% of the

total

24% 9% 15% 48%

Orderbacklog 5068 1705 5846 12619

% of the

total

19% 6% 21% 46%

LISTS OF NEW ORDERS I N ENERGY IN MEA


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IN INFRASTRUCTUREPUNJ LLOYD HAVE

ORDER BACKLOG OFRs12098 CR

CIVIL INFRASTRUCTURE

In civil and infrastructure vertical punj Lloyd limited focuses on the Indian marketas well as Middle East and Africa and its Singapore based subsidiaries in Singapore

and he south east Asia region. Punj Lloyd Limiteds infrastructure business

generated Rs. 4,270 crore of revenues and completed the year with an unexecutedorder backlog of Rs. 12,098 crore in 2011-12. Punj Lloyd the jaipur bypass the

Belgaum Maharashtra highway are few examples of the highway that they havedelivered the golden quadrilateral

DESCRIPTION CLIENT COUNTRY VALUEEPC Contract for Solar GradePolysilicon plant

Qatar Solar Technologies(QSTec)

Qatar 2,034

Falcon jet fuel pipeline and bulkterminal facilities

Horizon Jabel Ali Terminals Ltd.(Dubai)

UAE 673

Field Development including

wellheads and flow-linesAbu Dhabi Company forOnshore OilOperations (ADCO)

UAE 997

POWER

With great scope in power deficit country like India as thermalpower has been affected due to coal linkages, environmentclearances and tariff related issues. As this makes one of theimportant vertical of Punj Lloyd but there is a reduction incompanys activities but in nuclear power company is playingfairly aggressive .In 2011-12 company bagged 2 new orders 600mw thermal power project of haldia energy limited at Rs 1196 crand 3*18 MW coal fired power plant sangatta Indonesia project atRs350 cr.

Nuclear power sector is going through phase of confidence rebuilding in the wake of the Fukushima incident in Japan. Inprocess of this punj Lloyd bagged projects kakrapara atomicpower in Gujarat in Rajasthan for nuclear power Corporation ofIndia limited with order value of Rs678 cr. expected to becompleted by 2015.


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Financial performance of civil and infrastructure sector across different region(cr)

India Mena Asiapacific

total

Revenue 1492 1 2279 3772

% of total 14% 21% 35%

Order backlog 4579 4002 1508 10089

% of total 17% 15% 5% 37%

Punj Lloyd also gained entry into railways sector , by winning a contract for rail siding work at anpara UP

worth Rs 114 crore . Punj Lloyd is also bagged order for airport project worth 264 crore for buildingairport at paying, Sikkim. Company is also making effort in tapping market in overseas especially in

Middle East, Africa and south East Asia for infrastructure. Punj Lloyd subsidiary sembawang engineers

limited is one of its profitable subsidiary with core business in the urban infrastructure, building and

environmental sectors. As part of efforts to diversify its business and to create recurrent income,

Sembawang infused equity capital in April 2011. Its subsidiary, Sembawang Development Pte. Ltd.,

acquired a 50% stake in a thermal coal mine company in Central Kalimantan, Indonesia.

SEMBAWANGS CIVIL INFRASTRUCTURE & BUILDING PROJECTS EXECUTED OR UNDER

EXECUTION IN 2011-12

Project Client Approximatecontract valueMass Rapid Transit (MRT) Downtown Line 1 Project C906,

Singapore Construction and completion of Bay front Station and

associated tunnel works

Land TransportAuthority ofSingapore

S$463 million

Mass Rapid Transit (MRT) Downtown Line 2 Project C919,

Singapore

Construction and completion of Botanic Gardens Station

Land TransportAuthority ofSingapore

S$378 million

Construction and completion of Aquarius Hotel, ESPA, beach

villas, an oceanarium and a water theme park.

Resorts WorldSentosa Pte Ltd

S$419 million

CURRENT ORDER BOOKPunj Lloyd current order inflow forFY2012 was Rs 13817 crore whichis 38% higher than FY2011 and Rs2854 crore for FY2013

INVESTMENT RATIONALE

Punj Lloyd has actively worked on diversifying itsbusiness in this region. In terms of service line, it becamethe first company to have received an award for a solargrade polysilicon manufacturing plant in the regionPolysilicon is a critical raw material for solar panels thatgo into the generation of solar power. There is high

potential for further investments in solar powerdevelopment especially in Qatar and Saudi Arabia. Interms of geography, the Company is intensifying Mitsforay in Africa to relatively more stable countries in EastAfrica and West Africa and India they have plentyopportunity to invest in solar power India has historically

been a power deficit country and the demand for powerwill continue to grow as does its GDP so there is ampleopportunity for investment. As relatively low order bookat the beginning of the year revenue is out of the line


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with the high capital investment. The aggressive effortsin securing new orders done in the last couple of yearshas started bearing fruit and good visibility of revenue inthe next few years in 2011-12 punj Lloyd successes tosecured new orders of worth 14000 cr.

The punj Lloyd bagged order of 500 cr the

Singapore government on Monday. RichardGrosvenor, president and CEO of SembawangEngineers & Constructors, the associate

company in joint venture with Punj Lloydsexplains that the USD 100-million projects isof a plain-vanilla type and the company will

start to book revenues from Q1 of calendaryear 2013. The existing order book is

expected to be executed over the next twoyears. We Expect that given the concern on

private sector capex, Punj Lloyd will beshifting its focus. To government driven

infrastructure projects

The Companys orderbacklog stood for FY2012 at Rs27109

crore as against Rs 20677 cr in FY 2011 in which 70% ofbusiness is overseas but due to good order inflow in FY2012company order backlog is much better than as compared to

previous year.

ORDER BOOK UPDATE

Won a project worth Rs. 1,195 crore from Haldia Energy Limited, a wholly-owned

subsidiary of Calcutta Electric Supply Company to boost the power supply in Kolkata and its suburbs Won a civil contract valued at Rs. 210 crore from NTPC Ltd.

Won a contract worth Rs. 678 crore from the Nuclear Power Corporation of India Ltd.

Secured a submarine pipeline project worth Rs. 825 crore from the Gujarat StatePetroleum Corporation in an exploration block on the eastern coast of India.

Bagged a contract from GMR worth Rs. 1,050 crore for the design, engineering,procurement and construction of the six-lane Chittorgarh-Udaipur bypass in Rajasthan,over a length of 124 km.

Won a tender from Kolkata West International City to construct 194 villas in a satellitetownship in West Bengal.

Won a contract for Rs. 1,300 crore from Delhi Police for developing its Police Residential

Complex and Commercial infrastructure . Won a Rs 826-crore contract from Gujarat State Petroleum Corporation (GSPC) for a

submarine pipeline project in an exploration block on the countrys east coast schedule to

5%6%

12%

19%

0%

37%

21%

Unexecuted order book

offshore

tankage

power

pipeline

telecom

building &infra


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completed by April 2013. Bagged a road contract worth Rs 285 crore in Kenya, in a joint venture with Index

construction limited. Won a contract from the Emirates national oil company (ENOC) worth Rs. 623 crore to

set up the Falcon jetfuel pipeline and bulk terminal facilities. Punj Lloyd wins its first offshore project in middle east worth Rs 314 crore on 15 march 2013

FOCUSED ON ENERGY SECTORAs the punj Lloyd energy portfolio has share of 65% revenue and

63% unexecuted order book and spread across all geography sohave concentrate on this sector to generate revenue as many currentorders are from offshore project .As project spread across south

Asia, south east asia, middle east and Africa and they are splitbetween government and private orders which helps to stabilizesmargin in long run.

ORDER INFLOW TO REMAIN ROBUSTWe expect strong trend in order booking to continue , considering that project oftensecured by the lowest bid at price including the project given by NPCL punj Lloyd wasthe lowest bidder worth Rs 180cr.In addition we believe that punj Lloyd benefit from

the governments thrust on infrastructure development. The government is planning todouble the investment s in infrastructure to almost USD 1 trillion during 12 th five year

plan as compared to 11th five plan throwing open large opportunities in this segment

Private and PPP investments are estimated to have accounted for a little over 30.0 percent of total investment in infrastructure in the Eleventh Plan. Their share may have torise to 50.0 per cent in the Twelfth Plan which provides opportunity to private epc

segment to flourish more.

ABILITY TO TAKE ON BIG PROJECTSAs company is able to make big ticket project due to diversified work, strong presenceglobally and strong equipment base globally which can be readily mobilized.

Delivering the quality and standards services to the client and to complete them aheadof schedule make them to take offshore and big ticket projects. The follows the jointventure route to bid for large projects and to meet pre qualification criteria.


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Higher capex on equipment willlead to substantial cost saving.

RISING CAPEX WOULD D RIVE OPERATIONAL EFFICIENCYPunj gross block has raised from Rs 3364 cr to Rs 4145cr as the companyhas significantly ramped up its capital expenditure on equipment. Thistranslates to savings on equipment hiring charges and also bolsters

operating efficiency. The investment into new segments warrantsdifferent types of equipment and we expect to grow capex by 48% byFY2013-14 due to strong order book and healthy execution which in turn

drives revenue. Higher capex on equipment will also reduce subcontracting requirement and help to maintain margins with an upward

bias in the prevailing competitive scenario.

CONCERNS

RISKAt each stage company has to manage the risk. In dynamic market has to led

risk like in emerging market south Asia, south east Asia, and MEA wherepunj Lloyd as strong presence and market are very competitive due to

European slowdown which results into high intensity competition betweenpeers.

INTEREST RATESBenchmark interest rate increased from 5.5% at the beginning of 2011-12to 7.5% by March end 2013. This increase in interest rates has significantlyincreased the cost of capital. Punj Lloyd is actively tightening its cash

management to release as much capital as possible and is also exploringoptions of global sources of capital and also affects the capacity expansion

plan and the investment.

GEOPOLITICAL RISKMany of the new opportunities are in under-development markets like Africaand Libya turmoil where there are often very unstable political, social or

economic conditions. Implementing long term projects in such anenvironment of uncertainty is fairly risky for the project executors.

INFLATIONIndia remains a country with supply side condition trailing demandgeneration. Consequently, there has been a sharp rise in prices across the

board but primarily in basic commodities. Inflation directly affects the

Company in terms of higher costs, which may not be directly passed on tothe client. As inflation in FY13 recorded 6.86 as compared to 6.56 in

previous year.


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SWOT ANALYSIS

The fixed annual sharing-mechanism for under-recoveriesand the uncertain timing of cashpay-outs from the governmentadversely affect the profitabilityand working capital management.

Business is exposed to commodityprice volatility as a sharp increasein raw material prices may impactmargins.

As a major portion of revenue ofthe company is from outside India.Sharp fluctuation in currency mayimpact profitability

High level of investmentsexpected in the defence area.

More investment in civilinfrastruction project will help toboost revenue.

More concentration on pipeline

project in offshore as largequantum of money coming intooil producing nations mainlyMiddle East countries which willtranslate into multiple increasesin its own capex in Oil and Gassector.ore countries will help

Exposed to uncertain politicaland economic environments,government instability and legalsystems.

The company is into capital-intensive segments and thehigher depreciation costs andinterests costs keep its netmargins low.

Dont have consistensy inoperation and making revenue

Strategic alliances with largeconstruction and engineeringcompanies.

Global presence with newestablishment in 3 countries.

Strong order book

well equipped with certification.

Engages in various CSRactivities.

strong network

Strong equipment base

STRENGTH

SWEAKNESS

ES

THREATOPPORTUN

ITIES


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FINANCIAL OUTLOOK

Revenues to grow at 16.30%CAGR over FY13-19E

Expect revenue CAGR of 16.30% over FY13-FY19E We expectpunj Lloyd revenues to grow at a 16.30% CAGR over FY13-

FY19 to Rs 13113.75 Cr. driven by strong order momentum inall Segments. The company has witnessed continuous orderaccretion over the past year, the most recent being projects worth.

VALUATION

PEER COMPARISONCompany Order

book/sales

EBITDA

Margin (%)

M/Cap/sales P/Bv(x) FY13E

P/E (x)

FY14E

P/E (x)

L&t 10.41 14.3% 1.54 3.29 - -

ivrcl 17.52 9.1% 0.102 0.28 - -

Punj lloyd 24.602 52 0.299 0.46 53.48 50.49

GRAPHICAL REPRESENTATION

653895 1006

1131

92

22 2427

10,312.92 11,320.0012,726.00 14,306.00

1

10

100

1000

10000

100000

2012 2013E 2014E 2015E

OPERATING PROFIT(IN CR)

NET INCOME(IN CR)

SALES(IN CR)


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Target of 49.99 represents the downside of 4% exit Using the discounted cash flowanalysis FCFF target price of Rs49.99 exit. We have a target priceof 49.99 for the company, atwhich the stock would trade at16.28 x on FY13-14e EPS. Weinitiate coverage on exit andtarget price of 49.99 an downsideof 4% from the current level.

STOCK PERFORMANCE

16.5

13.3 13.04

0

2

4

6

8

10

12

14

16

18

2012 2013e 2014e

EBITDA MARGIN(%)

EBITDA MARGIN(%)


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CONSOLIDATED FINANCIAL

PROFIT AND LOSS ACCOUNT (IN CR)

Fy12 Fy13e Fy14e Fy15e Fy16e

Revenue 10,784.04 11665.31 13113.73 14742.00 16572.4

3%growth 31.86% 8.17% 12.42% 12.42% 12.42%

ebidta 1,124.35 1,239.46 1,393.36 1,566.36 1,760.85

Growth % 51.9% 10.2% 12.4% 12.4% 12.4%

depreciation 298.73 349.27 392.64 441.39 496.20

ebit 825.6 890.2 1000.7 1125.0 1264.7

Growth% 75.3% 7.8% 12.4% 12.4% 12.4%

Interest 632.5 814.42 915.54 1,029.22 1,157.02

Other income 471.12 344.41 387.17 435.24 489.28

ebt 193.12 75.77 85.17 95.75 107.64

tax 80.73 31.67 35.60 40.03 45.00

Effective tax rate% 7% 3% 3% 3% 3%

Adjusted net income

Growth%

Extra ordinary items 193.12 75.77 85.17 95.75 107.64

Reporter net income 112.39 44.09 49.57 55.72 62.64

Growth% -291% -61% 12% 12% 12%

Share outstanding

Basic eps 3.38 0.65 0.73 0.82 0.92

fdeps

dps 0.15 0.15 0.15 0.15 0.15


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BALANCE SHEET


Cash And Cash Eq 973.15 967.30 1,076.61 1,124.79 1,179.6

Account Receivable 2,421.29 2,657.95 2,987.97 3,358.97 3,776.0

Inventory 6,218.10 6,904.94 7,762.29 8,726.09 9,809.5

Others Current Assets

Current Assets 9,612.54 10,530.19 11,826.87 13,209.85 14,765.2

Long-Term Investment 370.69 457.67 514.49 578.38 650.1

Net Fixed Assets 2,786.96 2,878.11 3,055.99 3,255.96 3,480.7

CWIP 266.89 273.30 307.23 345.38 388.2

Intangible Assets

Other Assets

Total Assets 7,951.25 8,549.67 9,420.96 10,325.74 11,343.5

Account Payable

Others

Current Liabilities 6,452.64 7,083.32 7,962.82 8,951.52 10,062.9

Debt Funds 4,944.39 5,516.67 6,193.82 6,955.04 7,810.7

Provision 188.56 213.67 240.20 270.02 303.5

Equity Capital 66.42 66.42 66.42 66.42 66.4

Reserves 2,853.79 2,869.56 2,888.00 2,909.45 2,934.2

Shareholder Funds 66.42 66.42 66.42 66.42 66.4

Total Liabilities 7,951.25 8,549.67 9,256.92 10,052.71 10,948.0

Bvps

CASH FLOW STATEMENT


Net Income 112.39 44.09 49.57 55.72 62.6

Depreciation 298.73 349.27 392.64 441.39 496.2

Other Adjustment, Net

Change In Working Capital -887.57 -446.83 -440.42 -570.52 -641.3

Cash Flow From Operation 363.82 -218.75 -226.31 -254.41 -285.9

Change In Investments 13.03 -86.98 -56.83 -63.88 -71.8

Loan & Advances -445.42 -152.02 -212.00 -238.32 -267.9

Cash Flow From Investing -857.09 -353.58 -335.75 -452.85 -509.0

Free Cash Flow

Dividend Paid -150.42 -5.79 -5.79 -5.79 -5.7

Cash Flow From Finance 251.48 566.49 671.36 755.44 849.9

Opening Cash & Cash Eq 1214.95 973.15 967.30 1,076.61 1,124.7

Closing Cash & Cash Eq 973.16 967.30 1,076.61 1,124.79 1,179.6


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FINANCIAL RATIO


Ebitda margin (%) 16.50 13.03 13.03 13.03 13.03

Ebit margin (%) 0.077 0.076 0.076 0.076 0.076

Net profit margin (%) 0.0109 0.0039 0.0039 0.0039 0.0039

Fdeps growth (%)

Receivable (days) 107 108 108 108 108

Inventory (days) 245 266 264 264 264

Current ratio(x) 1.49 1.48 1.48 1.47 1.46

Quick ratio(x) 0.526 0.51 0.51 0.50 0.49

Interest coverage ratio(x) 1.305 1.09 1.09 1.09 1.09

Debt/equity(x) 1.7 1.9 2.1 2.3 2.6

Roe (%) 0.04 0.02 0.02 0.02 0.02

Roa (%) 0.34 0.35 0.36 0.37 0.38

Roce (%) 0.55 0.61 0.69 0.82 0.99

Ev/sales(x) 0.58 0.56 0.53

Ev/ebitda(x) 5.35 5.16 4.86

P/e(x) 53.48 52.17 68.48P/bv(x) 1.0 0.2 0.3 0.3 0.3

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