Dear all,
Strong execution of overseas projects
Ø Consolidated revenues grew by 31.1% YoY to INR 7.7bn due to good progress in execution of projects overseas such as Petronas, Malaysia and AMAS, Bahrain. Management has indicated that all overseas projects are now progressing as per schedule and is also seeing good traction from South East Asia and the Middle-East regions. The company also made its first breakthrough in the Latin America market in this quarter.
Ø The company currently has an order book of INR 79bn, which includes framework orders (Contracts wherein Advance Money/ LC awaited, hence not taken in Order Book) worth INR 8.7bn. Order intake for 1HFY17 stood at INR 15.2bn. Management highlighted a guidance of INR 32bn for revenue and Order Intake of INR 42bn for FY17.
Ø VTWL is also expecting two to four projects from the 'Namami Gange', which may happen in Q3FY17 & Q4FY17. The value of the orders is likely to be around INR 4.5bn.
Valuation: Healthy order intake and strong order book growth increases revenue visibility for ~3 years projecting a positive outlook for the company. A key point to monitor would be the speedy execution of low margin projects which are also putting a strain on the working capital of the company. At CMP the stock trades at 16.9X to FY18E. We rate the stock with a BUY rating and a target price of INR 655 assigning a target multiple of 19X FY18E. Risks: Cancellation of orders, slower order execution, delayed/non receipt of payments.
Regards,
CSEC Research
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