Sadbhav Infrastructure Projects LtdQ3 FY17
Sadbhav Infrastructure Projects Ltd Q3 FY17 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- →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 Infrastructure Projects Ltd rank vs peers in Construction?
Pro feature1Sadbhav Infrastructure Projects Ltd
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