The order book for VA Tech at the end of Q3 FY13 stood at Rs42.7bn. Domestic orders account for 67% of the overall order book. Contribution from low margin EPC segment of the overall order book has declined by ~200bps on yoy basis. In terms of clientele, Municipal orders account for 75% of the order book. Total order inflows for the company grew by 12.2% on yoy basis to Rs6bn for Q3 FY13. Order intake in the domestic market increased by 15.4% while order inflows that in the overseas market witnessed sluggish 5% growth.
Revenues for standalone business reported strong 20.2% yoy growth. Within standalone business, revenues from India grew by 5.9% yoy and revenues from rest of the world jumped by 159% yoy. On the consolidated basis, overall revenues increased by 20.8% yoy led by healthy 42% yoy growth in the revenues from rest of the world. Key projects that contributed to the strong revenue growth includes: a) Dambulla Municipality project, b) RIL Dahej – ETP, c) Majis Industrial services, d) APGENCO Rayalaseema project, and e) Nemmeli Desalination project.
Operating profit margin for Q3 FY13 expanded by 30bps on yoy basis for standalone business, while it contracted by 80bps on yoy basis for the consolidated business. Change in margin is largely on account of change in execution mix for the projects. Management expects margins for Q4 to improve significantly backed by stronger execution at the end of year resulting into benefits of operating leverage.
We expect order pipeline to remain robust for both domestic and overseas market. Growth in domestic market will be driven by strong order awarding from TN for Chennai desalination plant and Mumbai for Mumbai Sewage Treatment plant. The company has set up a new subsidiary in Spain to look at desalination opportunity in the Mediterranean region. Healthy order inflows would translate into strong order book. Further we expect strong execution to result into robust revenue growth for the next two years. Margins for the company are expected to expand with increase in share of O&M segment as the O&M portion of Chennai Desalination plant commences. We maintain BUY recommendation with a revised target price of Rs719.
|(Rs m)||Q3 FY13||Q3 FY12||% yoy||Q2 FY13||% qoq|
|OPM (%)||11.6||11.3||30 bps||12.5||(92) bps|
|Effective tax rate (%)||32.7||31.9||-||32.1||-|
|Adj. PAT margin (%)||7.5||6.8||65 bps||8.1||(59) bps|
|Ann. EPS (Rs)||25.6||19.4||31.4||26.6||(3.8)|
Segmental results (standalone)
|(Rs mn)||Q3 FY13||Q3 FY12||% yoy||Q2 FY13||% qoq|
|Rest of World||488||189||158.7||660||(26.1)|
|Rest of World||145||84||72.4||185||(21.5)|
|EBIT Margin (%)|
|India||18.7||18.9||(22) bps||22.2||(347) bps|
|Rest of World||29.8||44.7||
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