Maintain ‘buy’ on DBL with target price of Rs 620

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Published: November 21, 2018 4:27:54 AM

Dilip Buildcon’s Q2FY19 revenue at Rs 16 billion missed our/street’s estimate (Rs 20 billion).

dilip buildcon, dilip buildcon share, dilip buildcon TP Revenue at Rs 16 billion (estimate of Rs 20 billion) was impacted by slower execution due to monsoon.

Dilip Buildcon’s Q2FY19 revenue at Rs 16 billion missed our/street’s estimate (Rs 20 billion). Despite a tepid Q2, the management has maintained FY19 revenue guidance of Rs 100 billion as DBL, over the past three years, has executed 40% of annual revenue in H1, followed by a stronger performance in H2. In a scenario where road developers are grappling with delays in financial closure (FC) for HAM projects, DBL has final FC for eight projects and in-principle FC for three projects of its portfolio of 12 HAM projects. Execution of these projects will be the key revenue contributor for FY20. Further, a robust order book (OB) of Rs 240 billion (OB/ sales of 3x) provides healthy revenue visibility — 20% CAGR over FY18-21E.

Revenue at Rs 16 billion (estimate of Rs 20 billion) was impacted by slower execution due to monsoon. Ebitdam declined 70 bps year-on-year to 17.3%, while PAT was lower 28% y-o-y at Rs 832 million (vs our/street estimate of Rs 1.5 billion). Despite a tepid Q2, management reiterated FY19 guidance — revenue: Rs 100 billion; Ebitdam: 17-18%. NWC rose to 156 days (vs 145 days quarter-on-quarter; 120 days y-o-y) due to increase in inventory days, as DBL invested in new project sites, with mobilisation advances to flow in only after receiving the appointed date.

DBL has equity requirement of Rs 13.2 billion for its under-construction HAM projects over three years. FY19 equity (Rs 6.6 billion) would be funded through: (1) pending accrual from Shrem; Rs 4.8 billion – Rs 1.6 billion received in YTDFY19, and (2) internal accrual of Rs 1.8 billion.

Moderate FY19 estimates on below expectation H1 performance. Trim FY19 EPS by 8% and FY20 EPS by 5%. Lower target multiple to 10x (from 16x earlier) on adverse macro scenario (drop in government capex, rise in interest rates, elevated crude price etc).

We maintain ‘buy’ with a target price of Rs 620 (10x FY20E EPS of Rs 62). Of 12 HAM projects, DBL’s received final FC for eight projects, in-principle FC for three projects, and balance 1 project FC is in final stage (expected by Q3).

The management highlighted that the execution of these HAM projects will be the key revenue contributor to FY20 topline, as most of the projects have received >80% land acquisition.

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