MEP Infrastructure Developers LtdQ1 FY18
MEP Infrastructure Developers Ltd Q1 FY18 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹0.59Market Cap: ₹19 CrSector: Transport Infrastructure
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
Yes
Capex
Yes
3 of 5 growth signals are positive.
Full analysisRevenue guidance
Category 3- →FY 17 revenue remained stable at Rs. 461 crores, in line with FY 16 Q1 despite project maturation.
- →Medium-term growth expected through strong visibility from Hybrid Annuity Model (HAM) projects.
- →Six HAM projects awarded with order book value of Rs. 3,827 crores, commanding ~19% market share.
- →Potential new long-term projects via TOT (Toll-Operate-Transfer) model with estimated bid size of Rs. 75,000 to 1,00,000 crores.
- →TOT projects expected to provide long tenure (20-30 years) revenue streams from existing toll roads.
- →Financial closures of HAM projects anticipated between Sept-Dec 2016, enabling project commencements.
- →The company actively bidding for more long-term and TOT projects to increase order inflow.
- →Revenue growth visibility constrained by limited clarity on TOT ticket sizes but expected to improve with project clustering finalization.
Margin guidance
Category 3- →Margins on EPC (Engineering, Procurement, and Construction) projects are conservatively expected at 14-15%, with potential eventual combined margins exceeding 16-18% due to economies of scale and operational efficiencies (Page 8).
- →The company has a robust bidding pipeline, especially in long-term Hybrid Annuity Model (HAM) and TOT projects, providing good visibility of future revenues (Page 11).
- →The recent award of 6 HAM projects totaling an order book of around Rs. 3,827 crores positions MEP Infra as a leader in this segment, anticipated to support steady revenue growth (Page 1).
- →Financial closures for these HAM projects are expected between September to December 2016, securing medium-term operational earnings (Page 1).
- →The company expects adequate cash profits to cover near-term debt repayments (~Rs. 100 crores in FY17 increasing over the years), supporting financial stability (Page 12).
- →Ongoing participation in TOT projects with long tenure (20-25 years) is expected to enhance long-term revenue visibility (Page 11).
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Fundraise plans
Yes- →The company has board approval to raise authorized share capital up to Rs. 300 crores.
- →Fundraising is planned through preferential allotment or a rights issue targeting existing shareholders and potentially fresh investors.
- →Promoters are committed to infusing a substantial portion of the required equity capital for Hybrid Annuity Model (HAM) projects.
- →Equity requirement for six HAM projects is estimated at around Rs. 530-555 crores, with 12-15% equity component.
- →Debt-equity ratio for HAM projects is targeted around 25:75 (equity:debt), not including a 40% NHAI grant.
- →In-principle bank approvals have been received for financial closure of the six HAM projects, with closures expected between September and December 2016.
- →Debt repayment obligations for FY17 are about Rs. 100 crores, ballooning to Rs. 150+ crores in FY18 and increasing subsequently.
Order book
Yes- →MEP Infra currently has a strong order book with 6 awarded Hybrid Annuity Model (HAM) projects, valued at around Rs. 3,827 crores, representing approximately 19% market share in HAM space (Page 1).
- →The total project cost for these 6 HAM projects is about Rs. 3,800 crores with EPC work of Rs. 3,500 crores (Page 6).
- →The company expects to achieve financial closure for all 6 projects between September and December 2016 (Page 1).
- →There is robust visibility and pipeline for long-term projects, including Hybrid Annuity Model projects (6 orders in hand) with project life spans of 15+2.5 years and TOT projects with shelf life of 20-25 years (Page 11).
- →The bidding pipeline remains strong, with a company focus on hybrid annuity and TOT projects to expand the long-term portfolio (Page 11).
- →The government plans to award 25,000 km highway projects in FY17, with 40% of projects under HAM requiring investments worth Rs. 60,000 crores, offering good opportunities for future orders (Page 2).
Capex plans
Yes- →The company is undertaking significant capital investment related to its 6 Hybrid Annuity Model (HAM) projects, with an aggregated project cost of around Rs. 3,800 crores.
- →Total EPC work for these projects is about Rs. 3,500 crores.
- →Indicative equity requirement is approximately 12-15%, equating to Rs. 530-555 crores, to be infused over the life of the projects.
- →The joint venture partner San Jose India will contribute 26% equity in 4 projects and 40% in 2 projects.
- →The company has board approval to raise authorized share capital to Rs. 300 crores via preferential allotment or rights issue to meet upfront equity requirements.
- →Promoters are committed to infusing a substantial portion of the required capital for equity needs of HAM projects.
- →The company is consolidating and financially closing these 6 projects, with financial closures anticipated between September to December 2016.
- →Actively monitoring and selectively participating in TOT projects, anticipating future strategic investments there.
How does MEP Infrastructure Developers Ltd rank vs peers in Transport Infrastructure?
Pro feature1MEP Infrastructure Developers Ltd
Rev 3Mar 3
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