More than the weakness on margin and interest cost (to normalize from FY2017), we focus on Sadbhav’s potential to secure orders in 4QFY2016. An 8% market share for Sadbhav in NHAI’s 450 billion tendering pipeline will raise its end-FY2016 order book by 20% y-o-y.
This will still defer the strong uptick in execution to FY2018. We factor in lower growth in EPC execution and negligible change in WPI for the BOT portfolio for FY2017. We revise our Sep17-based SoTP to R335 from R355; cut our rating a notch to add from buy.
SEL reported broadly in-line revenues of 7.5 billion (up 4.5% y-o-y). EBITDA margin at 9.8% was much below our estimate of 10.5%, down 40 bps y-o-y. This is driven by a very sharp increase in other expenses due to VAT payments for the Mysore Bellary execution (will impact margin in 4QFY16 and then normalize). A16% q-o-q, the increase in net interest cost and low other income, further impacted PAT, which declined 31% y-o-y. The debt exposure of SEL to SIPL has increased in the quarter to `5.5 billion and SEL has also lent another 0.5 billion for the Mysore Bellary project. This would normalize incrementally as grant payments delayed for key under construction projects have started to come in January. More will come in 4QFY16.
Order backlog at 83 billion is flat y-o-y and was impacted by the lack of new orders in 3QFY16 and SEL reducing an EPC order from MSRDC of 3.2 billion.
Based on tendered prospects of NHAI, more than 450 billion of awards can get finalised in 4QFY16.