Ebitda margin was sequentially flat at 5.0% (international business slipped into the red) and higher depreciation pulled down the Ebit margin by 20 bp to 2.8%. New orders grew at a healthy 16% y-o-y to Rs 2,620 crore while order backlog was up 9% y-o-y.
There is still low visibility on extent of improvement in international business. CRGs international business during Q3 again posted an Ebit loss (-0.1%), albeit a marginal one after reporting an improvement during Q2.
We anticipate the margin recovery to be more gradual than our previous expectation, resulting in us revising our forecasts down by 12-15% over FY13-16. While we remain upbeat on a potential business turnaround (FY13-16 earnings CAGR of 85%), consensus we believe, is overestimating the margin recovery. We are 18-22% below consensus forecasts).
Retain neutral with a lower target price of Rs 116 (down 16%). Our 16% cut in target price is driven by a 12% cut in valuation base case earnings (FY16e) and 5% cut in target PE (x) to 13.7x (10% below last business cycle mean PE ). The stock is currently trading at PE of 16.3x FY15 EPS, while we expect 12 months from now it will trade at 13.7x FY16 EPS.