Strong showing by Dilip Buildcon gets stock rated Neutral by Credit Suisse

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Published: November 18, 2017 3:24:55 AM

DBL is targeting Rs 80-100 billion of orders in FY18E (vs Rs 120 billion in FY17). However, we build Rs 70 billion of inflows, given muted activity so far in both roads and mining.

Dilip Buildcon (DBL) posted strong results with 70/80% y-o-y growth in sales/EBITDA. Margins were in line with management’s full-year guidance of 18%.

Dilip Buildcon (DBL) posted strong results with 70/80% y-o-y growth in sales/EBITDA. Margins were in line with management’s full-year guidance of 18%. Inflows were negligible. Order book is reasonable at Rs 142 billion, 2.1xFY18E sales. Net debt rose by Rs 2.1 billion q-o-q, driven by working capital (sales growth). Stuck receivables are now Rs 3.0 billion, down Rs 180 million in 2Q. Management revised up FY18E sales guidance to Rs 70 billion. With this strong execution, we highlight that revenue visibility for FY19/20E requires healthy order inflows, which have been missing for DBL to date in FY18E. DBL is targeting Rs 80-100 billion of orders in FY18E (vs Rs 120 billion in FY17). However, we build Rs 70 billion of inflows, given muted activity so far in both roads and mining.

Raise FY18/19/20E EPS by 18/12/8% as we revise up sales estimates; maintain Neutral with revised TP of Rs 840 on higher earnings. Key downside risks include delay in getting Appointed dates of HAM projects, weak ordering activity.

Strong results: DBL’s strategy of working with its owned equipment and manpower helped the company deliver strong revenue growth this quarter, which is usually a lean one for its peer group.

Order book stands at Rs 142 billion, which includes Rs 35 billion of orders from four hybrid annuity (HAM) projects. DBL expects Appointed dates for these to come through in Dec/Jan (vs earlier expectations of Oct/Nov). Further, the mining segment is likely to contribute only Rs 4-4.5 billion of revenues in 2H. Given the possibility of delay in getting appointed dates of HAM projects, we build lower revenues in FY18E as compared to management’s guidance.

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