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Sadbhav Infra.Q3 FY18

Sadbhav Infra. Q3 FY18 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹2.75P/E: 2.9Market Cap: ₹91 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 analysis

Revenue guidance

Category 3
  • →The company expects further growth driven by large infrastructure projects announced across India, leading to higher revenue and cash generation.
  • →Traffic growth is picking up, with commercial traffic showing good momentum; some projects like Aurangabad-Jalna have seen >15% traffic growth.
  • →Completion and toll collection start from 23 check posts by March 2018 will boost revenue, with toll rate hikes likely from April 2018.
  • →Post refinancing, repayment obligations are lower (~300 Crores), freeing more cash for growth capital.
  • →SIPL forecasts generating cash surplus of around 1300-1400 Crores between FY2019-2021 from operational SPVs.
  • →HAM projects will continue to be added steadily, with 3-4 new projects expected yearly.
  • →Bharatmala program's large-scale bidding (~30,000 Crores by Dec 2017) and construction targets till 2022 present significant growth opportunities.
  • →Continued organic traffic growth with expectations of double-digit sustainable growth in some projects.

Margin guidance

Category 3
  • →Sadbhav Infrastructure Project Limited (SIPL) is entering a clear cash generation mode with significant growth capital available due to refinancing completion and reduced repayment obligations (~300 Crores).
  • →Expected cash surplus of approximately 1300-1400 Crores between FY2019-FY2021 from operational SPVs, supporting growth without additional external funding.
  • →Traffic growth in commercial vehicles is strong with some projects showing double-digit sustainable growth potential.
  • →SIPL plans to add 3-4 new HAM projects annually, maintaining growth momentum.
  • →Revenues expected to increase due to operationalization of new toll projects and revision of toll rates annually for inflation.
  • →Refinancing and improved cash flows forecast quarter-on-quarter cash generation jump from Q3 onwards.
  • →Major maintenance margins remain healthy at 20-22%, contributing to profit stability.
  • →Overall, profitable growth with steady EPS improvement expected driven by operational efficiencies, asset additions, and traffic growth.

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Fundraise plans

Yes
  • →Sadbhav Infrastructure Project Limited (SIPL) plans no additional external funding beyond current refinancing efforts.
  • →Company completed major refinancing, reducing repayment obligations to around Rs. 300 Crores, aiding cash surplus generation.
  • →Incremental equity infusion of Rs. 90-100 Crores expected in second half for three under-construction HAM projects (Waranga-Mahagaon, Udaipur bypass, Rampur Kathgodam II).
  • →Future HAM projects may require incremental equity but current equity infused (~Rs. 155 Crores) suffices for ongoing projects.
  • →Plans to add 3-4 new HAM projects annually, leveraging available growth capital internally generated.
  • →Asset monetization (stake sales) under process as additional growth capital; no firm proposals yet.
  • →No discussion on dividend policy or new equity to date; dividend intentions remain under consideration and tied to bidding outcomes.
  • →Debt repayments scheduled with major bullet payments from FY2020 onwards, suggesting no immediate large debt raises.

Order book

  • →As of November 2017, the balance order book from the HAM (Hybrid Annuity Model) project is around ₹360 Crores.
  • →Revenue from HAM projects booked in the first half of FY2018 was around ₹103 Crores, compared to ₹99 Crores in FY2017.
  • →Expected HAM revenue for H2 FY2018 is between ₹120 Crores to ₹125 Crores.
  • →The balance HAM order book is expected to be exhausted in the next 21 months.
  • →The company is optimistic about bidding activities, especially with the upcoming Bharatmala program tenders (~₹30,000 Crores by December 2017).
  • →SIPL intends to continue adding 3-4 new HAM projects every year, depending on opportunities.
  • →Total project inflow under Bharatmala is expected to favor EPC mode around 65%-70%, providing execution opportunities.
  • →The company expects a significant volume of bidding activity in Q4 FY2018 and beyond, aligned with national infrastructure plans.

Capex plans

Yes
  • →Sadbhav Infrastructure Project Limited (SIPL) plans to continue adding HAM (Hybrid Annuity Model) projects, targeting around 3-4 new HAM projects every year, reflecting a strategic focus on HAM projects (Page 24).
  • →Incremental equity infusion of around ₹90-100 Crores is anticipated in the second half of the financial year for three HAM SPVs: Waranga-Mahagaon, Udaipur bypass, and Rampur Kathgodam package II (Page 13).
  • →Debt drawdown in SPVs is around ₹1170 Crores, with equity infused about ₹155 Crores up to Sept 2017; further incremental funding expected in coming quarters (Page 13).
  • →Given government's large-scale infrastructure push like Bharatmala program, Sadbhav sees good growth capital opportunity, with possibility to add a couple of projects as they come on favorable terms (Page 16).
  • →Cash surplus at operational SPV level expected to be ₹1300-1400 Crores across FY2019-FY2021, providing organic growth capital (Page 25).
  • →Refinancing completed for various projects to optimize capital structure and reduce repayment burdens (Page 25).

How does Sadbhav Infra. rank vs peers in Construction?

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1Sadbhav Infra.
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