Sadbhav Infrastructure Projects LtdQ2 FY18
Sadbhav Infrastructure Projects Ltd Q2 FY18 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹2.72P/E: 3.2Market Cap: ₹99 CrSector: Construction
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- →Traffic growth in operational projects is positive with notable increases in certain corridors (e.g., Rohtak–Panipat 16.4%, Rohtak–Hissar 15.6%, Hyderabad–Yadgiri 11.2%). Overall portfolio traffic volume growth was around 6.5% in Q1 FY2019.
- →Toll rate hikes, including an 18% hike at Maharashtra Border Check Post from April 1, 2018, are expected to boost revenues.
- →New maintenance revenues from five recently won HAM projects are anticipated to start contributing from Q2 FY2019, supporting standalone business revenue growth.
- →Ongoing construction and commencement of new HAM projects (12 projects) expected to enhance revenue over the next two to three years.
- →Management expects strong cash profit growth (60% jump projected for FY2019 over FY2018), indicating solid revenue and volume momentum.
- →Bidding activity for new hybrid annuity projects is expected to increase from September 2018 with 34 projects worth Rs. 36,612 Crores in the pipeline.
Margin guidance
Category 3- →Sadbhav Infrastructure Project Limited expects continued growth driven by strong cash generation from operational Special Purpose Vehicles (SPVs) and repayments each quarter.
- →The company anticipates increased cash profits in FY2019, with Q1 cash profit more than doubling year-on-year, supported by refinancing and traffic growth.
- →Operational SPVs revenue guidance stands at around Rs.1200 crores with EBITDA margin around 85% for FY2019.
- →Maintenance revenues from new HAM projects will boost standalone business revenue from Q2 FY2019.
- →The company is optimistic about bidding for new Hybrid Annuity Model (HAM) projects, targeting lucrative returns with expected equity IRRs around 19-20%.
- →Monetization (churning) of stabilized projects will generate liquidity for funding new projects.
- →Strong pipeline: NHAI has 34 HAM projects worth Rs.36,612 crores expected to be bid by September 2018, with manageable competition aiding win probabilities.
- →Overall focus on expansion with managed debt and equity deployment aims at sustaining profitable growth.
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Fundraise plans
Yes- →Sadbhav Infrastructure Project Limited plans to fund equity requirements for ongoing and upcoming HAM projects primarily through internal accruals and cash generation from operational projects in FY2019-2021.
- →The company has drawn Rs.150 Crores out of Rs.520 Crores sanctioned at Maharashtra Border Check Post, with balance funds available for equity investment.
- →Management is considering monetization of operational assets to raise further funds for growth and equity funding of new HAM projects.
- →There is no explicit mention of raising fresh debt or equity from external sources immediately, but refinancing and restructuring of existing debt (NCDs) has been done to optimize costs.
- →Management aims to complete financial closure for remaining HAM projects by September-October 2018 through lender discussions, indicating fundraising through project financing arrangements rather than direct equity/debt issuance.
- →The focus is on bidding for new HAM projects with firm equity visibility and possible pre-bid lender tie-ups to facilitate financial closure.
Order book
- →Outstanding order book of Sadbhav Infrastructure Project Limited (SIPL) is around Rs. 720 Crores for maintenance of 12 HAM projects, to be executed over 24 to 30 months.
- →This includes L1 status for five newly won HAM projects.
- →The MMR of Dhule–Palesner project is almost complete, with Rs. 16 Crores of work outstanding.
- →Major maintenance for Bijapur–Hungund and Hyderabad–Yadgiri projects is expected to commence in the second half of FY2019.
- →Total outstanding order book including all maintenance work stands at approximately Rs. 850 Crores, scheduled for execution in the next 24 to 30 months.
Capex plans
Yes- →Sadbhav Infrastructure Project Limited plans to continue bidding for Hybrid Annuity Model (HAM) projects due to lucrative terms and expected lower competition.
- →The company aims to maintain bidding activity for a good set of projects over the next 8-10 months.
- →Equity infusion for 12 HAM projects includes around Rs. 321 Crores already invested, with a balance equity requirement of about Rs. 470 Crores.
- →Funding for equity is expected primarily from internal accruals during FY2019-2021, supplemented by available sanctioned debt of Rs. 370 Crores.
- →The strategy involves developing projects to stabilization, generating cash, and monetizing operational assets to recycle capital for new HAM projects.
- →The focus remains on completing projects, stabilizing cash flows, and strategic asset churning to enable growth and maintain liquidity for future bids and investments.
How does Sadbhav Infrastructure Projects Ltd rank vs peers in Construction?
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