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Arshiya International Limited- AIL going strong with its FTWZ business- Margins and Profitability expected to improve. Arshiya International (AIL) has pioneered the development and operations of a Unified Supply Chain Infrastructure and Solutions - comprising Free Trade & Warehousing Zones (FTWZ), Industrial and Distribution Hubs, Rail & Rail Infrastructure, Transport & Handling, Forwarding and Supply Chain Technology & Management. AIL has started its Khurja FTWZ with 2 warehouses and  it can be estimated that the company to ramp it up to 4 by end of FY13E. The company is already operating 4 warehouses at Panvel FTWZ and we estimate the company to ramp it up to 8 warehouses by end of FY13E. In the rail segment the company operates 20 rakes currently which they would ramp up to 30 by end of FY13E. The company continues to grow steadily in its core third party logistics (3PL) businesses. The company is expected to deliver revenue CAGR of 24% over FY12 to FY14E to ~ Rs...

The third quarter FY12 numbers of the infrastructure companies were mixed bag with some of the companies disappointed on execution, margins and net profit front. Execution was likely to increase significantly from Q3FY12/Q4FY12 onwards, however it continued to remain below expectations due to adverse macro-economic scenario of high interest rates and delays in project approvals.Profitability was impacted by poor execution and continued high borrowings and working capital requirements. Companies like IVRCL,NCC,BGR Energy and J Kumar Infra were impacted by these issues. However, IRB Infra, JP Associates, Unity infra and Pratibha industries outperformed market expectations. Current order books remained healthy but execution growth was impacted due to very high interest rates or lack of funding to achieve financial closure or environmental clearance related issues. Companies like IRB Infra, JP Associates, Unity Infra and Pratibha industries reported excellent growth which was better th...

Post the acquisition of Areva T&D by a consortium of Alstom and Schenider Electric, the operations of Areva T&D india have been bifurcated into transmission business (to be retained by Alstom group) and distribution business (to be transferred to Schneider Electric). As part of the demerger scheme, the shareholder of Areva T&D will receive one share of the demerged company (to be named Smartgrid Automation Distribution and Switchgear Ltd) for every share held in Areva T&D. Smartgrid Automation Distribution and Switchgear Ltd would be listed by the end of January 2012. The stock became ex-date on Dec 14, 2011, following which the price corrected 24% to reflect the valuation of the transmission entity only. Based on DCF calculations, the target price works out to Rs 158 per share, thus valuing at 22x CY12 earnings. The growth outlook for the T&D equipment sector continues to be weak given overall reduction in power and industrial sector investments pipeline in H1...

Result Update: Punj Lloyd. Revenues of Punj Lloyd for Q1FY12 reported a growth of 40% on consolidated basis as against same period last year. This was better than market expectation and led by improved execution. Operating margins witness an improvement on sequential and yearly basis and stayed at 7.4%.Company's profitability was impacted by increase in interest outgo which resulted in net loss for Q1FY12. At current price of Rs 56, stock is trading at 8.5x P/E and 7.0x EV/EBITDA for FY12 respectively. For FY12,higher interest rates may continue to impact overall performance of the company. Due to high working capital requirements of the company coupled with high interest rates, the stock is expected to under-perform from these levels.

Bharat Electronics Ltd (BEL) Results update: BEL posted strong set of numbers for the fourth quarter as the company managed to post its targeted revenue numbers for the year. For the quarter, margin expansion was aided by higher revenue booking (42% of full year revenue vs 36% in Q4FY10), change in product mix and absence of provisions for pay revisions. Tax rate is lower possibly due to higher R&D expenditure. Even as the Capital Goods sector has struggled to book orders during the fiscal, BEL has won major orders. Resultantly, its order backlog has doubled in FY11, thus it is strongly positioned for driving revenue growth in FY13 and beyond. The company should also be a beneficiary from the offsets that are likely to accrue from the US$10 bn aircraft order that the Indian government is all set to place with Rafale or Eurofighter. The company enjoys a dominant status in the defence sector and has a steady growth profile. At 16.2x, near-term valuations are close to the highe...

Gati - results update: GATI reported its FY10 results which are below market estimates on the profitability front due to pressure on its shipping business and losses from cold chain business and international operations. Some of the key factors include: • Strong growth in express distribution and supply chain management business. • Looking to demerge coast-to-coast shipping business. • Set up Redsun Supply Chain Solutions business.

Result Update: Simplex Infrastructures. • Simplex Infra reported 10% and 5% de-growth for Q4FY10 and full year FY10 revenues respectively as against same period last year. This was lower than market estimates as well as management's guidance of achieving a flat growth in FY10. • Operating margins were better than our estimates and stood at 10.2% and 9.8% for Q4FY10 and FY10 respectively, led by selective bidding by the company. • Net profits registered 82% growth for Q4FY10 but declined by 3% for the full year FY10. This was impacted by flattish revenue growth as well as higher tax outgo. • At current price of Rs 479, stock is trading at 14.2x and 11.7x P/E and 6.5x and 5.8x EV/EBITDA multiples for FY11 and FY12 estimates respectively. With expected increase in overall order inflows and increased traction from international order inflows, investors can accumulate the stock with a price target of Rs 474 on FY11 estimates.

Simplex Infra -stock update. Strong growth in FY09: Simplex Infra witnessed a strong 68.6% YoY rise in its revenues to Rs47.4bn in FY09. Operating expenses increased by 69.1% YoY to Rs43bn driven mainly by consumption of materials (45.4% of net sales) & employee cost (31.6% of net sales). While operating profits surged 64.2% YoY led by the buoyant topline growth, OPM declined marginally by ~25bps to 9.3%. Net profits for the year were at Rs1.2bn (+37% YoY) translating into an EPS of Rs24.9. Strong Order book at ~Rs101bn: Fresh order inflows for the quarter stood at Rs1.1bn, taking the full year inflows to Rs56.6bn (+15.5% YoY). Around 30% of the backlog consists of overseas projects; 36% accrue from the Government sector & 34% from various private sector parties. ~95% of the present backlog remains completely hedged against commodity price fluctuations, barring piling jobs. Valuations. At the CMP of Rs392, SIL trades at a P/E of 12x & EV/EBIDTA of 6.2x its FY10E earnings....

IVRCL Infrastructure - Result highlights. Revenues of IVRCL Infrastructure for Q4FY09 and full year FY09 grew by 23% and 33% respectively as compared to same period last year. Operating margins for the current quarter and full year stood at 8.7% and 8.6%, lower than street estimates. Net profit growth for Q4FY09 and full year FY09 stood at 9% and 7%. Performance of subsidiaries. IVRCL's progress on its BOT projects is impacted by delays with two road BOT projects witnessing a delay of almost 6 months as against estimated completion by March, 2009. Kumarapalyam tollways is likely to get operational from June, 2009 while Jalandhar Amritsar Tollway is expected to get completed by Sep, 2009, Salem tollways by October, 2009 and Chennai Water Desalination project is expected to take another 2-3 months. Valuation. At current price of Rs 332, stock is trading at 16.5x and 14.8x its P/E multiples on FY10 and FY11 estimates respectively. IVRCL Infrastructures is set to benefit from economic ...

KSB Pumps - Pump division drives growth. Result highlights: KSB Pumps has reported a strong 31.4% improvement in its top line to Rs175.4 crore. The top line growth was primarily driven by a 46.9% rise in the pump revenues. However, the revenues of the valve division declined by 7.9% during the quarter but remained almost flat on a sequential comparison. The operating profit margin (OPM) of the company has remained volatile over the last couple of years. On a segmental basis, the profit before interest and tax (PBIT) margin of the pump division declined by 270 basis points to 12.8% on account of a different mix of orders while that of the valve division declined by 410 basis points to 21% due to a slower top line growth. Consequently, the overall OPM of the company declined by 440 basis points year on year (yoy) to 15.8%. As a result, the operating profit for the quarter grew marginally by 2.7% to Rs27.7 crore. Slightly higher interest and depreciation costs led the company to report ...

Sanghvi Movers Ltd -Result highlights. Sanghvi Movers Ltd (SML) has reported strong performance during Q3FY2009,both on revenue and profitability front. SML’s income from operation grew by 37.8% to Rs88.8 crore led by better-than-expected utilisation and higher yields. The operating performance of the company surprised positively with a 290-basis-point year-on-year (y-o-y) improvement in the operating profit margin (OPM) to 75.7%. on account of a decline in the operating cost. The net profit increased by 34.8% to Rs23.9 crore as against our estimate of Rs18.6 crore. The profits were higher mainly due to a better top line growth coupled with better operating performance and high other income component. The other income was high due to sale of an old crane, which realised Rs1.9 crore. The company has added Rs55 crore worth of cranes during the period under review. The total fleet size of SML now stands at 323 cranes, accordingly the gross block of the company now stands at Rs950 crore. ...

Robust order book and order inflow expected IVRCL has a robust order book of Rs.140bn which provides a revenue visibility for next 2.5 years. Order book of Rs.140 bn provides diversification across water and irrigation projects (68%), buildings (20%), power (7%) and transportation (5%). IVRCL is carrying out the building projects primarily for the large developers and state government where risk of delayed payments is minimal. Order inflow in the current fiscal till date has also been to the tune of Rs 67bn and company is L1 in another Rs 20bn worth of orders across segments. Decline in commodity prices to augur well for the company. Commodity prices have come off quite sharply in past few months which are expected to augur well for the company as well as for the entire sector. Out of the total order book, 92-93% is hedged with variable pricing clauses while the remaining are fixed price contracts. Star rated contracts constitute 70% of the variable pricing contracts while remaining co...