Accumulate Dilip Buildcon; target of Rs 275: Dolat Capital

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Dolat Capital's research report on Dilip Buildcon

We drastically reduce our revenue estimates by 24.8%/ 17.9% for FY21E/ FY22E on account of loss of revenue led by lockdown due to covid-19. We decrease EBITDA margin estimates for FY21E/ FY22E by 50/ 20 bps to 16.0%/ 16.5%. Accordingly, we lower our APAT estimates by 72.2%/ 41.9% for FY21E/ FY22E. The sharp reduction in APAT is due to sizable depreciation (average Rs4.5 bn) and finance cost (average Rs5.7 bn) despite factoring Rs4 bn/ Rs506 mn debt reduction in FY21E/ FY22E. We expect DBL’s revenue/ Adj. APT to de-grow at CAGR of 2.1%/ 16.5% over FY20-22E. The management has refrained from giving any guidance until any clarity emerges. Though the stock has corrected/ increased ~34%/ 17% since our Q3FY20/ Covid report on 10th Feb’20/ 24th Mar’20, we believe the fixed cost model (owning equipment + relatively higher debt) of DBL will be severely impacted due to loss of revenue.

Outlook

We reduce to Accumulate with a downward revised SOTP of Rs275 (7x FY22E EPS + 1x FY22E PB for equity investment in HAM).

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