Sadbhav Infra. Q3 FY17 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
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- Revenue from operational SPVs for FY 2017 is expected to be around Rs. 1125 Crores, based on the current run rate and normal toll rates (Page 6).
- SIPL standalone revenue is expected to be roughly Rs. 300 Crores in FY 2018, driven mainly by routine maintenance of HAM projects and measure maintenance of operational SPVs (Page 11-12).
- January 2017 traffic showed growth of 2-3% compared to January 2016, indicating recovery post demonetization, with expectations of continued growth into FY 2018 Q1 (Page 3).
- Toll rate hike for FY 2018 is finalized at approximately 4.3%, which will positively impact revenue growth (Page 11).
- Bidding pipeline for HAM projects is significant, with expectations to win 4-5 projects per year, supporting future sales and volumes growth (Page 4, 12).
- Cash EBITDA margin from operational SPVs is expected to remain around 85% going forward (Page 6).
See what Sadbhav Infra. management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- No current stake sale or equity fundraising planned; the company prefers asset churning and focusing on construction expertise (Page 10).
- Equity requirement for new HAM projects estimated at Rs.400-500 Crores yearly, funded through internal accruals (Page 10).
- Consolidated debt as of Dec 31, 2016, is Rs.8,225 Crores; standalone debt is Rs.1,108 Crores (Page 6).
- Plans to refinance major SPVs like Maharashtra border check post, Shreenathji-Udaipur, Bhilwara-Rajsamand by FY2019, focusing on converting majority of debt into bonds to benefit from better pricing (Pages 15-16).
- Refinancing expected to complete by Q4 FY2017 or early FY2018 with bond issuances (Page 14-16).
- Monetization of assets under discussion with potential investors, but no agreements or final decisions yet (Page 9-10).
See what Sadbhav Infra. management said on order book — free account, 30 seconds.
Capex plans
Yes- Equity commitment of around Rs.460 Crores for five HAM projects, with Rs.79 Crores additional for Mysore-Bellary project (Page 9).
- Equity spend mainly expected in FY2018 and FY2019, with some upfront equity required in the current quarter (Page 9).
- Capital expenditure for routine and measure maintenance: estimated Rs.125 Crores for Dhule-Palesner and Hyderabad-Yadgiri MMR in FY2018; Rs.70-75 Crores for Bijapur-Hungund and Rs.290 Crores for Rohtak-Panipat in FY2019 (Pages 6, 9).
- Ongoing bidding for new HAM and BOT projects aiming to add around 4-5 new assets yearly with total equity requirement of Rs.400-500 Crores (Page 10).
- The company's strategy focuses on developing and constructing roads, with plans for asset churning post maturity (Page 10).
- No current signed agreements on asset monetization, but discussions with potential investors are underway (Page 10).
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Margin guidance
Category 3- Revenue from operational SPVs for FY2017 expected around Rs.1125 Crores with ~85% cash EBITDA margin, indicating stable operating profitability.
- FY2018 SIPL standalone revenue anticipated at Rs.300 Crores, driven by routine and measure maintenance activities.
- Toll rate hike for FY2018 projected around 3-4.3%, supporting revenue growth in toll-based projects.
- Reduction in average interest cost from 10.3% to around 9%-9.1% for SPVs post refinancing by FY2019 expected to improve margins and profitability.
- Refinancing of major SPVs planned by FY2019 to capture bond market advantages with lower interest rates.
- Plans to add 4-5 new projects yearly with equity around Rs.400-500 Crores, fueling growth and asset portfolio expansion.
- Expected normalization and growth recovery post demonetization impact, with traffic and toll collection improving from FY2018 Q1 onward.
- Debt service coverage ratio maintained at comfortable 1.28 supporting sustainable profitability and growth.
Order book
- As of the call, SIPL has an outstanding order book of Rs. 290 Crores towards routine maintenance of five HAM projects, expected to be executed over 24 to 30 months.
- The company expects standalone revenue of about Rs. 300 Crores in FY2018, including routine and measure maintenance contracts.
- SIPL is actively bidding; six HAM projects of lane 453 km worth Rs. 5814 Crores had bids submitted, with three bids still unopened.
- The HAM bidding pipeline includes 23 projects totaling Rs. 26,275 Crores (1473 km) with financial bids due by March 31, 2017.
- For BOT toll projects, only 2 bids totaling Rs. 2,821 Crores (133 km) are upcoming before March 31, 2017.
- SIPL plans to continue bidding for both HAM and BOT toll projects, focusing on capturing 4-5 projects per year.
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What Sadbhav Infra.'s management said in earlier quarters
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