Add ITD Cementation India, target price Rs 54: HDFC Securities

HDFC Securities has given an add rating to ITD Cementation India with a target price of Rs 54. The share price moved down by -0.10 per cent from its previous close of Rs 49.55. The stock’s last traded price is Rs 49.50.

During 4QFY20, ITD has written off Rs 409 million of receivable and unbilled revenue for the ILFS Power Plant project in Cuddalore. With ILFS moving into NCLT, ITD auditors advised to take write off. According to the brokerage, ITD will pursue the claims with a new buyer (post NCLT process). The jetty is crucial for linking imported coal to power plant and currently coal is transported from Chennai port by road to power plant. Reported loss stood at Rs 54 million and APAT at Rs 356 million.

Investment Rationale

Despite Covid-19 impact, ITD’s reported strong 4QFY20 execution leading to revenue/ EBIDTA beat of 25/54 per cent. ITD APAT stood at Rs 356 million vs. our estimate of Rs 35 million. With robust FY20 order inflow/backlog of Rs 60/107 billion, FY21 should have been a strong year for ITD with Rev of Rs 40 billion+. Covid-19 has resulted in migrant workers going home and construction work coming to halt. At best the brokerage expects ITD to record 50 per cent revenue in 1QFY21 (Rs 3.5 billion) with gradual ramp up to Rs 10 billion by 4QFY21E.

Though ITD has taken cost control measures, negative operating leverage in the first half of FY21 will result in PAT breakeven for FY21E. Weak first half of FY21 will limit further re-rating whilst a stable balance sheet with net D/E of 0.2 times will limit correction. It maintains an add rating with an increased target price of Rs 54/sh based on 8 times Mar-22E EPS against Rs 44/sh earlier. The target price increase is driven by 22.3 per cent FY22E EPS upgrade.



Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 739.61 crore, up 4.56 per cent from last quarter sales of Rs 707.34 crore and up 25.37 per cent from last year's same quarter sales of Rs 589.95 crore. The company reported net profit after tax of Rs -15.34 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 46.64 per cent stake in the company as of March 31, 2020, while FIIs held 6.79 per cent, DIIs 25.38 and public and others 21.13 per cent.