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22 December, 2014 20:18 IST
MSFL maintains `Buy` on Unity Infraprojects
Source: IRIS Exclusive | 16 Nov, 2012, 04.16PM
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Marwadi Shares & Finance (MSFL) has maintained 'Buy' on Unity Infraprojects with a price target of Rs 54 as compared to current market price (CMP) Rs 44 with Upside Potential of 23% in its report dated Nov. 16, 2012. The broking firm gave following investment rationale on the stock:

Topline came in at Rs 4.01 billion, 2.9% higher y-o-y, v/s expectation of Rs 4.5 billion. This moderate revenue growth is attributed to lower than expected execution in projects of water segment. EBITDA grew 12.3% y-o-y to Rs 711 million as against our expectation of Rs 633 million. EBITDA margin improved y-o-y and sequentially by 148bps and 368bps respectively. Gross margin surprised positively and witnessed at 732bps y-o-y expansion. Gross margin stood at 29.7% as against 22.5% in Q2FY12. However,  570bp y-o-y decrease in fixed cost resulted in 148bps expansion in the EBITDA margin. EBITDA margin stood at 17.7% as against our expectation of 14.1%. We expect the margins to decline and stabilize in the range of 13-13.5% over FY12-14E.

We have revised our revenue estimates downward due to slower than expected execution and delay in financial closure of captive BOT projects. However after a strong opearting margin of 15.8% in H1FY13, we have factored in 60bps expansion in EBITDA margin for FY13E. Unity Infra reported single digit revenue growth for the consecutive quarter, which was a surprise for us given a strong order book and robust order inflows in last 18 months. Unity Infra (Q,N,C,F)* reported revenue at Rs 4.01 billion, up 2.9% y-o-y and 10.6% below our estimate while PAT at Rs 168 million, down 18.6% y-o-y was 17.4% below our estimates. Company reported margin of 17.7%, and witnessed a 148bps improvement in EBITDA margin and was above our expectation of 14.1%. This surprise in margin was attributed to one time escalation claim to the tune of ' 80-100mln from clients. On adjustment of this escalation claim margin stood at 15.2%. Higher than expected interest and tax rate, coupled with lower other income resulted in 18.6% decline in net profit to Rs 168 million.

A comfortable order book of Rs 41 billion provide visibility  for FY13-14E  however execution on captive projects (25% of order book) will be key growth driver. We continue to believe on company's ability to execute the projects however delay in commencement of BOT projects will moderate revenue growth in FY13E but expect company to pick its growth momentum in FY14E. We maintain our `Buy` recommendation with a revised price target of Rs 54.

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