Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
RPP Infra Projects Ltd. (BOM – 533284) (NSE – RPPINFRA)
Last Price (11/5)
151 INR
Market Cap
337 INR Crore
Industry
Infrastructure & Irrigation
Relative Valuations
Dividend Yield (%)
0.34
Return on Equity
12.7%
Price Target (FY17)
INR 243 (60%)
RPP Infra’s Focus on Boosting Order Book, Niche Projects
Adjusted P/E
Forward P/E
EV/ EBITDA
RPP
19x
14x
8.6x
Sector
23x
20x
9.8x
Country
20x
17x
11x
P/CF
14.5x
12.6x
9.5x
Source: Medici Estimates, Bloomberg
RPP’s Order Book Distribution
Government spending, Niche Projects to Drive Margins
Incorporated in 1988, RPP Infra Projects Ltd. is engaged in civil construction,
infrastructure, construction of roads, water pipeline projects, industrial structures and
irrigation projects. The company is headquartered in Erode, Tamil Nadu and executes
projects primarily in the states of Karnataka, Andhra Pradesh, Tamil Nadu and the Union
Territory of Andaman Nicobar Islands. As of April 2016, RPP Infra has an order book of
approximately Rs.780 crores (2.4x of TTM consolidated revenue).
Buy-side:
Targeting of niche segments will
continue to boost bottomline.
Partnerships with Siemens and other
international giants will help in a
bidding
of
bigger
projects,
augmentation of order book.
Government spending to push infra
and construction growth
Government spending in the infrastructure, construction, and irrigation space continues to
be a major driver for growth in the sector. RPP Infra’s model relies primarily on state
spending on construction as well as infrastructure projects. The company is targeting new
states like Madhya Pradesh as well as strategic partnerships with local and international
players like Siemens for boosting its order book.
Sell-side:
Long term trajectory
High competition in the sector can
push pressure on margins.
RPP Infra has seen steady growth across its execution trajectory over the past few quarters.
The company is relying on its core strength of executing projects at a fast pace on EPC
basis in order to manage large book at relatively less amount of liquidity. The model has
helped the company to maintain strong margins.
An elongated working capital cycle
will increase need of short term
capital.
Entry into already competitive states
like Madhya Pradesh.
In FY16, RPP Infra is expected to expand its topline by approximately 20%-22% with 50
basis to 75 basis points dent in operating margins on lower execution in the last two
quarters. However, the trend is expected to improve over the next few quarter with higher
margins in FY17.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Joint ventures inked, focus on diversified partnerships
Smaller projects and quick
execution key to RPP’s higher
margins.
RPP Infra bids for projects between Rs.50 to Rs.100 crores. The company is in a better
position to bid for smaller projects as it can control onsite operations, raise milestone bills
faster and hence enhance liquidity. However, in order to bid for bigger projects the
company has entered into a memorandum of understanding with Hunan Construction
Engineering Group Corporation of China and Delamore & Owl Group of Companies of
Canada. A joint venture with Chinese construction giant will enhance technical skills,
expertise in project execution and will also help in supply of equipment, design and
engineering.
Joint Ventures will enable the
company to bid for bigger projects
as well as tie up funding at a faster
pace.
RPP’s push in Central Indian
States will lead to further
diversification
RPP Infra will participate in a tendering process, project management and allocation of
resources. Canadian giant Delamore & Owl Group would act as a co-sponsor and funding
partner. It will also provide assistance in finance and cost management.
Existing status and projects
Hunan Construction is keen on executing projects on EPC basis however Canada’s
Delamore is looking to fund projects primarily on Built Operate Transfer or BOT basis.
RPP Infra prefers to execute projects on EPC basis. The company is in dialogue with
Hunan Construction for establishing a company in India with investments being deployed
by the Chinese giant and both the entities getting engaged in an execution of various
projects.
Proposed partnerships
RPP Infra is also in dialogue with few other international players to strike out similar
structure with latter entities deploying capital and/or execution skills whereas RPP Infra
engages in management as well as an execution of the projects. The company is jointly
bidding for Rs.1,500 crore project in Bangladesh with Siemens for an order of Rs.75 –
Rs.100 crore falling in net of RPP Infra.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Power, Water Management and Construction Crowds RPP’s Order Book
In 2016, RPP Infra has bagged major order from Neyveli Lignite Corporation for Rs.56.5
crore which includes construction of 154 residential quarters general civil works phase II
roads and drains package. The company also received two orders for construction works
at the proposed ITBP Complex from Engineering Projects India for Rs.58.5 crore. Overall,
RPP Infra has bagged orders totaling Rs.360 crores, or 47% of the total order book, in the
first three months of 2016 reflecting strong built up and impact of joint ventures.
Civil construction and
management
dominate
company’s order book
water
the
Book diversified among major
South Indian states
RPP Looking to bid for projects in
Central
India
for
further
diversification
RPP’s orders include mainly projects in construction, power and water management with
the expected EBITDA margins in the range of 12%-15%. The company’s major projects
include construction of integrated storm water drain in Coovum water shed of Coovum
basin, rehabilitation of Bhadrawathi canal and construction of scientific godown of 40,000
metric tonne capacity at Nagapattinam.
What is expected to augment RPP’s order book?
As of April 2016, RPP Infra has participated into various tenders of Rs.850 crores on a
standalone basis as well as along with joint ventures entities. These projects are in the
areas of lift irrigation, roads construction, civil construction and prefab structures. The
company is bidding for these projects in Madhya Pradesh, Karnataka, Tamil Nadu and
internationally in Sri Lanka and Bangladesh. Awarding of new projects in Tamil Nadu
and Kerala has slowed due to run up to state elections. However, state governments in
Karnataka, Madhya Pradesh, Telangana have consistently invited bids for irrigation and
construction projects. The orders in the bidding process are in a range of Rs.50 crore to as
high as Rs.350 crore.
RPP’s management expects operating margins of 10%-14% on these projects. If the
company successfully receives even 30%-40% of the total projects its order book is
expected to cross Rs.1,000 crores.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
How RPP is Benefiting from Niche Projects and Execution Skills
Niche Segments
The construction space is highly competitive and is expected to grow at 6% in 2016
backed by government spending, easing monetary policy, housing for all and other
reforms for accelerating growth. As a result of competition and higher working capital
cycle, margins in the industry tend to be lower. However, RPP Infra reported higher
operating margins of 12.2% in FY15 and 12.6% in 9MFY16. The company is generating
higher margins due to an execution of niche and complex projects like building reinforced
concrete roads and water pipeline projects.
Quicker turnaround, focus on
projects where all bases are covered
results in higher operating
margins.
Protection of escalation and
penalty
clauses,
benefit
of
mobilization advance helps in
augmenting of margins.
The niche areas like pipeline projects have higher entry barriers with execution cycle
being as high as five years with first billing generated in 14-18 months. RPP Infra sub
contracts 25%-35% of its total work, which is altered in order to decrease the turnaround
time. The company has designed processes in order to enhance quality, ensure quick
deliverables and corresponding reporting to the top management.
Out of its total book, only two projects of construction and formation of flood carrier canal
totaling Rs.30 crores, forming 4% of the total order book, have faced delays mainly due
to non-availability of land from the respective government entities.
Mobilization, escalation, and penalty clauses
RPP Infra engages in projects covered by escalation clause in order to hedge against wild
swings in commodity prices. The billing is revised based on wholesale price index
released by the central government agencies. The company also benefits from 10%-15%
mobilization advance, which is interest-free, provided at the time of rewarding of a
contract. RPP Infra mobilization advance for its existing book stood at Rs.48 crore. Strong
advances facilitate in an easing of working capital cycle as well as benefits in an overall
profitability of the company. RPP Infra can also claim for penalty interest amount in case
of delayed payment from select government entities and projects. The penalty interest rate
of 15% can be recovered in case of delayed payments, this arrangement facilitates
recovery of any costs on blocked capital.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
RPP Infra – One of the Most Profitable Construction and Infra Entity
Higher Operating Margins
RPP Infra Projects went public in 2010 and its stock has almost doubled since its listing.
The company’s EBITDA margin has improved to 17.3% in FY15 as compared to 14.8%
in FY12. The company’s book has expanded by 50% over the past four years. RPP’s
extended working capital cycle is getting funded primarily by Rs.58 crore of cash credit
limits, which if improved or any reduction in interest rates will lead to a higher bottom
line. Its net profit margin improved to 6.6% in FY15 as compared to 5.7% in FY12.
Commodity prices benefit players
RPP’s operating expenses have shown steady growth with material costs declining in
FY15 mainly due to lower commodity prices internationally. The trend is expected to
continue for the next few quarters as manufacturing activity in China decline on a shift
towards services.
Bigger projects mean lower profits?
RPP Projects derives higher margin from niche and complex projects like construction of
RCC roads and water pipeline projects. The company intends to focus on the niche and
diversified areas across the offerings as well as regions in order to hedge itself against
traditional slowdowns in the construction space. RPP Projects has managed its operations
on asset light basis i.e. the company leases equipment in order to reduce shifting time as
well as deploy lesser capital on acquiring as well as maintenance of assets. The trend is
expected to continue although we might see a majority of the equipment leased from
Hunan Construction.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
RPP Infra Targeting Lower Rates, Improving of Capital Structure
RPP Infra’s total debt as on March 31, 2015 stood at Rs.81 crore consisting of Rs.73 crore
in cash credit facilities primarily from Indian Overseas Bank and Axis Bank. As on March
31, 2016, utilization levels are expected to be in line with the prior year. The financial
costs for FY16 is estimated at Rs.18- Rs.19 crore with an effective rate of interest of 14%.
The company is in negotiations with its bankers for reduction of interest rates by 75 bps
to 100 bps which would result in savings of Rs.1-Rs.1.25 crore per annum. These
initiatives would boost net margin by 1% on an absolute basis.
In talks with bankers for reduction
of existing rates by atleast 75-100
basis points.
Rated as an investment grade entity
(Brickworks
BBB-).
Any
improvement in the ratings will
help easing of interest rates.
Elongated working capital cycle
RPP has been witnessing some delays in repayment from select government entities,
especially in pipeline projects. The company prefers projects backed by World Bank or
Nabard in order to ensure timely payments on billings. The delays resulted in a substantial
increase of debtors to Rs.170 crores as compared to Rs.79 crore in the previous year,
which has been subsequently transferred to sub-contractors resulting in an increase of
creditors to Rs.118 crore as compared to Rs.34 crore in the previous year. The company
has received a substantial portion of its outstanding in FY16 and has applied for interest
recovery at 15% from the respective entities.
The working capital cycle is estimated to improve in FY16 with debtors declining to
Rs.100-Rs.110 crore and creditors towards Rs.80-Rs.90 crore. Any improvement in the
cycle should help the company in free capital for undertaking more projects.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Competition
The construction space is market by intense competition, however, projects requiring
specialization as well as having higher turnaround time like a pipeline, irrigation and
concrete roads has less competition. RPP’s major book comes from Karnataka, Tamil
Nadu and Andhra Pradesh. The company faces competition from local as well as regional
contractors like Ramalingam Construction, IVRCL, Madhucon, Marg Infrastructure, JMC
Projects and other private contractors.
Competitive Landscape
1
RPP Infra Projects Pvt. Ltd.
Mkt
Cap
(Rs.
Crores)
336
2
Simplex Infrastructures Ltd
1,375
4,611
3
Hindustan Construction Co
1,671
5,873
4
NCC Ltd
4,106
6,026
5
Punj Lloyd Ltd
779
5,295
-40.01
6
Supreme Infrastructure India
277
2,004
-30.12
7
J.Kumar Infraprojects Ltd
2,165
2,489
0.70
8
KNR Constructions Ltd
1,549
1,577
9
IL&FS Transportation Network
2,628
11,219
Sl. No.
Company
(As on April 22, 2016)
0.34
Revenue
Growth
(Y-o-Y)
(%)
12.97
EPS
Growth
(Y-o-Y)
(%)
47.78
Return
on
Equity
(%)
13.50
Total
Debt
(Rs.
Crore)
110
0.18
1.24
3.02
4.40
2.28
-4.51
35.63
164.72
EV
(Rs.
Crores)
Dividend
Yield
(%)
397
0.54
Debt /
Equity
Debt /
EBITDA
0.6
3.1
3,369
2.3
5.0
6.16
11,899
16.0
9.5
3.4
3.91
3,390
0.9
-14.57
7,141
7.7
-84.16
2.46
4,184
4.5
11.6
13.18
4.90
13.84
515
0.7
2.1
0.36
4.95
19.74
13.49
768
0.9
6.0
4.88
3.48
-21.42
7.70
23,513
3.9
10.9
Source: Medici Estimates, Bloomberg Estimates
How increasing competition can Impact Margins?
RPP Infra is focusing on new states like Madhya Pradesh, Uttar Pradesh for diversification
as well as an expansion of its existing book. Madhya Pradesh is witnessing all round a
development in the infrastructure space. The state has seen investments and projects
across the development of airports, dams, water management, irrigation, pipeline and
roads construction. Major companies like Dilip Builders, SEW Constructions, Som
Projects, Prakash Asphalting, Emerald Industries, PNC Constructions, Chetak
Enterprises, Shree Construction and many other private contractors are involved in a
tendering process. The state has attracted major interest from west and south India-based
construction companies looking to expand beyond their states. As a result, initially these
companies attract tenders based on an attractive price quotation translating into lower
operating margins.
Shift towards bigger projects,
construction and states with higher
competition can put some pressure
on margins.
RPP Infra will also look for projects in the state of Uttar Pradesh, however, these would
start finding traction in the order book post state elections which are due in 2017.
However, that is necessary for next
growth phase in order to ramp up
qualifications.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
How Government Spending and Global Factors can Impact the Industry
GoI has earmarked Rs.50,000 crore
for development of 100 smart cities.
The current government has clearly prioritized spending in the infrastructure space in the
budget as well as through other measures like an easing of norms and limits in foreign
direct investment. The government is pushing for manufacturing locally in order to push
for employment as well as support rural growth. In the Budget 2016, the central
government has earmarked Rs.86,500 crore for irrigation in order to give a boost to
agriculture production. There is a huge gap in irrigation facilities as more than 60% of the
total 142 million hectares of farm land in the country is not covered under irrigation.
Budget 2016 – Rs.2.2 lakh crore
allocated
for
infrastructure
spending. Roads sector getting
boost of Rs.97,000 crore.
GoI has unveiled plans to invest
$137 billion in railways over the
next five years.
The infrastructure sector on a whole got a record allocation of Rs.2.21 lakh crore in order
to revive investments in the sector with the participation of private players. The road sector
has received highest allocation of Rs.97,000 crore including Rs.19,000 earmarked for
rural roads. The construction space is expected to benefit from tax exemptions for
developers as well as individuals on affordable housing.
Low-interest rates, commodity prices
Commodity prices for steel, oil have rebounded almost 50% from their lows in 2016.
However, they the prices are still low when compared with the 2014 peaks. Any
substantial increase in commodity prices will make a dent on allocation as well as an
execution of projects as interim margins tend to get impacted. Prices for steel, cement and
other major input raw materials for construction space are expected to be weak as
manufacturing activity slows in other major nations including China.
If we head southwards
The world economy hasn’t recovered completely from the 2007 financial crisis. Countries
are using monetary and fiscal measures to push for exports and hence growth. If there is
a pullback in any major economy like the US, China or Japan, it can have major negative
impact on global growth and hence infrastructure spending. China’s economy is in a midst
of becoming more service driven than the exiting growth model driven by exports. The
US has raised interest rates for the first time in six years, the economy has improved but
runs very high debt on per capita basis.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Valuations
RPP is currently trading at 14x on a one-year forward price to earning basis as compared
to the industry average of 19x. Traditionally, the company and overall sector have traded
at a discount to the broad market as entities deal with lower margins, higher debt
composition and delays in execution primarily from the government front and lower
budgetary allocations. However, the current government is focusing on increasing
infrastructure spending and smoothening execution process. These changes combined
with lower interest rates and lower commodity prices are expected to provide a boost to
the overall sector.
RPP is asset light company, deploys
strategy of leasing assets. On price
to earning basis, the company is
marginally undervalued.
Medici as well as management
estimates reflect high teens growth.
One of the strongest in the space.
On a one year forward basis, the company’s peers are trading at an EV to EBITDA
multiple of 9.8x, considering increased visibility in revenues, joint ventures for bidding
of bigger projects, revaluation of stock to that of the industry and a bottomline growth of
around 20%-22%, the stock can garner a valuation of Rs.243 on one year forward basis
and Rs.288 by the end of FY18. As the company is asset light and deploys a strategy of
leasing assets, valuation on the basis of price-to-earnings would reflect fair valuation.
RPP’s order book has expanded at a good pace in 2016 reflecting a pickup in the overall
industry. RPP can garner higher valuations as its increases its networth, rationalizes its
elongated working capital cycle and further diversifies its order book.
On the basis of Price-to-earnings
Sl. No.
Parameter
A
Price Per
share
Multiple (x)
PAT
Mkt Cap
Exit in 2017
18.0x
30
545
241
B
Exit in 2018
18.0x
37
676
299
C
Exit in 2019
18.0x
50
905
401
D
Exit in 2020
18.0x
63
1,143
506
Source: Medici Estimates, Bloomberg Estimates
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
RPP’s Performance in the Recent Quarters
Floods in the South India led to
lower execution in the December
2015 and March 2016 quarter.
In 9MFY16, RPP Infra posted revenues of Rs.249 crore, forming 95% of FY15 revenues,
as compared to Rs.180 crore in the prior year period. The higher execution was mainly
due to a strong book, quicker execution and retrospective billing in the first two-quarters.
In the December quarter, RPP Infra posted revenues of Rs.72 crore as compared to Rs.92
crore in the previous quarter mainly due to floods in Southern India and building up of
state elections which resulted in lower execution. For the March quarter, revenues are
estimated at Rs.70 - 75 crore bringing the FY16 total to Rs.320 crore, reflecting 22%
growth on a year over year basis.
The management expects some
slowdown due to state elections in
the June quarter. Estimates
turnover of Rs.90-95 crore.
In FY17, RPP’s management estimates revenue of Rs.90 – Rs.95 crore in the June quarter
and ramping up of execution with yearly estimates of Rs.380 – Rs.400 crore.
Subdued profitability
The company posted a profit before extraordinary items of Rs.17 crore as compared to
Rs.15 crore in the prior year period. The net margins excluding tax and extraordinary
items stood at 7% as compared to 6% in FY15. The rise in margins can be attributed
partially to decline in commodity prices over the past few quarters. In the first nine months
of FY16, RPP Infra reported Rs.34 crore as compared to Rs.26 crore in the prior year
period. The company reported diluted earnings per share Rs.5.51 as compared to Rs.5.11
in the prior year period.
RPP Infra executed projects in a pipeline, water management and there has been a strong
foray into construction projects in order to boost book as well as execution.
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
2016 Projects Dominating Order Book
Date
Principal Party
(Rs. Crore)
Warehouse Godown in Chennai
Apr-16
Container Corp.
11.6
Construction of 160 Nos. PC Quarters
Mar-16
Karnataka Police Housing
30.9
Construction of combined admin blocks at Kalikiri Chittoor.
Mar-16
EPI-ITBP
34.2
Construction of Type II,III,IV quarters at Kalikiri, Chittoor
Mar-16
EPI-ITBP
24.3
Rehabilitation of Bhadravathi canal
Feb-16
KNNL
Construction of 154 Nos. of various types of Resindential Quarters
Feb-16
NLC
31.7
Road and Storm water drain in NTPL campus at Tuticorin
Feb-16
NLC
21.0
Pipeline work at Kulithalai, Karur
Feb-16
TWAD
42.0
Construction of quarters in 2 places - Dharwad, Karnataka
Jan-16
Karnataka Police Housing
30.5
Chainpura Charanpura Bhaura Road-Madhya pradesh
Jan-16
MP PWD
29.2
Construction of Quarters at Bhel Trichy
Dec-15
BHEL
2.7
Periodical renewal, New Mangalore Port Trust, Road construction
Dec-15
NHAI
26.3
Development work at Mudhaliar Kuppam,Chennai
Oct-15
Tourism Develop
Nagapatinam
Aug-15
TNCSC
Construction of 51 tenants at Ramnadu- staff quarters
Aug-15
TANGEDCO
4.1
Construction of Integrated storm water drains in Coovum
Jun-15
Chennai Corp
118.0
Proposed Gauge conversion work between Tiruvarur-Karaikudi
May-15
Southern Railway
Construction of Pipeline Corridor in Reach III for MSEZ
Mar-15
MSEZ
WSIS to Tindivanam municipality in Vilipuram District
Feb-15
TWAD, Tamilnadu
46.0
Construction of Scientific godown of 29,000 MT capacity at Tanjavur
Dec-14
TNCSC
25.0
Udumalaipettai
Dec-14
TWAD ,Tamilnadu
27.0
Road and Drain improvement works in City Municipal council
Nov-14
Gadag
21.9
Coimbatore
Nov-14
TNCSC
9.1
Providing CWSS to 212 rural Habitation
May-14
TWAD
13.1
Providing CWSS to 327 Rurual habitation in Salem District
Apr-14
TWAD
6.7
Creek.
Feb-14
Chennai Rivers
6.3
Formation of Flood Carrier Canal
Mar-12
PWD
12.6
Construction of Sea Wall/ Shore Protection Work at Mus, Car Nicobar
Dec-11
CPWD
17.1
117.0
1.5
Construction of Scientific godown of 40,000 MT capacity at
28.4
32.6
8.4
Providing CWSS to 158 habitations in Gudimangalam and
Construction of Scientific godown of 22,000 MT capacity at
Implementation of Eco restoration in 300 acres of Adyar Estuary and
Total Book
779.3
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
DIRECTOR PROFILE
Directors
Mr. P Arulsundaram
Mrs. A Nithya
Mr. P Muralidasan
Mr. A P C
Krisshnamoorthy
Position
Chairman, Managing
Director
Director
Director
Independent Director
Mr. S Swaminathan
Independent Director
Mr. K Natarajan
Independent Director
Description
Has an experience of more than two decades in
the industry of civil works in the field of
transportation, power, commercial buildings, and
irrigation. He holds Bachelors in Civil
Engineering. As a Whole Time Director he is
involved in strategic affair, business
development, and overall management of
operations.
Has an experience of more than 15 years with
RPP Infra. She looks after finance, accounts and
treasury functions. She is involved into strategic
affairs as well as looks after fund raising and
other important financial decisions of the
company.
Has wide experience of project execution and
management. He acts as a project head for
various projects and has three to four project
managers reporting to him.
Has been associated with RPP Infra since three
decades and acts as a legal advisor to the
company.
Has a rich experience of managing power and
related projects with BHEL. He has worked in
Indonesia towards various power projects. He is
involved in business development activities for
RPP Infra.
Has vast experience in power and related
projects and is currently involved with RPP Infra
for business development activities.
Beneficial
Ownership/
(% O/S)
9788443
43%
6579898
29%
156
-
-
-
-
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Projected Financials
RPP Infra’s Income Statement
(All figures in INR Crores unless stated otherwise)
FY11A
FY12A
FY13A
FY14A
FY15A
FY16E
FY17P
FY18P
FY19P
FY20P
214
265
260
240
266
324
422
519
628
753
2
3
3
7
5
5
5
5
6
6
216
269
263
247
270
329
427
524
633
759
51
65
72
68
54
82
105
131
155
190
Works Contract
73
101
83
67
89
101
130
165
196
235
Labour Wages
38
33
39
41
66
67
93
112
140
163
5
4
1
7
5
5
7
8
10
12
6
8
9
7
5
6
6
7
7
8
11
14
17
15
13
19
23
28
35
42
184
224
220
204
231
279
364
451
543
650
33
45
43
43
40
50
62
73
91
110
4
8
10
8
7
8
9
9
10
12
29
38
33
35
32
42
54
63
80
98
5
10
17
17
17
16
15
16
16
17
24
27
16
18
15
26
39
48
64
81
-
1
(0)
-
6
-
-
-
-
-
24
28
16
18
21
26
39
48
64
81
5
6
5
5
5
6
8
10
14
18
19
23
11
14
17
21
30
37
50
63
Shares in issue (Lakhs)
226
226
226
226
226
226
226
226
226
226
Earnings per share (Rs.)
8.27
10.00
5.03
6.02
7.34
9.08
13.37
16.59
22.20
28.03
Revenue from operations
Other income
Total Revenues
Operating Expenses
Raw Material Cost
Direct Operating Costs
Freight, Power and Other Charges
Total Employee Benefit Expenses
Other manufacturing expenses
[-] Total Operating Expenses
EBITDA
[-] Depreciation
EBIT
[-] Interest
PBT and exceptional, extraordinary items
Extraordinary item
PBT
[-] Taxes
PAT
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
RPP Infra’s Balance Sheet
(All figures in INR Crores unless stated otherwise)
FY11A
FY12A
FY13A
FY14A
FY15A
FY16E
FY17P
FY18P
FY19P
FY20P
Cash Credit / Overdraft Utilization
23
65
75
71
78
75
78
82
86
90
[+] Accounts payable
37
45
40
22
107
70
90
113
135
163
[+] Other Current Liabilities
38
55
32
36
47
48
49
50
51
52
Liabilities & Equity
Current Liabilities & Provisions
[+] Short Term Provisions
8
7
6
7
7
7
7
7
7
7
105
173
152
136
239
200
224
252
279
312
Long term borrowings
9
13
15
15
7
4
1
0
0
0
Deferred tax liabilities
0
1
1
1
-
1
1
1
1
1
Long term provisions
0
0
-
-
0
0
0
0
0
0
[+] Total Non Current Liabilities
9
14
16
16
8
6
3
2
2
2
Share Capital
23
23
23
23
23
23
23
23
23
23
Reserves and surplus
64
86
97
133
148
167
196
232
281
343
[+] Total Networth
86
109
120
155
171
190
219
255
304
366
201
296
289
306
418
396
446
509
584
680
30
27
14
12
14
27
50
40
56
74
Total Current Liab. & Prov.
Non Current Liabilities
Networth
Total Liabilities & Equity
Assets
Current Assets
Cash & Cash Equivalent
[+] Inventory
1
1
1
1
2
1
2
3
4
4
[+] Account Receivables
63
106
107
94
188
146
160
220
263
322
[+] Loans & Advances
35
39
40
60
60
64
69
74
79
84
[+] Other Current Assets
30
64
72
85
93
101
110
119
130
141
Total Current Assets
160
236
234
251
358
340
391
456
531
626
[+] Net Fixed Assets
27
53
48
47
39
37
35
33
32
32
[+] CWIP
1
0
1
3
3
-
-
-
-
-
[+] Non-current investments
0
0
0
0
0
0
0
0
0
0
[+] Long term loans and advances
4
2
2
1
1
1
1
1
1
1
[+] Other non current assets
8
4
3
4
16
17
18
18
19
20
201
296
289
306
418
396
445
509
584
680
Total Assets
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Ratio Analysis
(All figures are dimensionless unless stated otherwise)
FY11A
FY12A
FY13A
FY14A
FY15A
FY16E
FY17P
FY18P
FY19P
FY20P
EBITDA Margin
15.3%
17.0%
16.6%
17.7%
14.9%
15.5%
14.8%
14.1%
14.4%
14.5%
EBIT Margin
13.5%
14.1%
12.8%
14.5%
12.1%
13.0%
12.7%
12.2%
12.8%
13.0%
PBT and extraordinary Margin
11.1%
10.3%
6.2%
7.6%
5.6%
8.1%
9.2%
9.2%
10.2%
10.8%
8.7%
8.5%
4.4%
5.7%
6.2%
6.3%
7.2%
7.2%
8.0%
8.4%
Revenue
23.9%
-2.1%
-7.6%
10.7%
22.0%
30.0%
23.0%
21.0%
20.0%
EBITDA
38.1%
-4.4%
-1.4%
-7.0%
26.5%
24.5%
16.8%
24.4%
20.8%
EBIT
29.9%
-11.3%
4.3%
-7.3%
30.7%
27.7%
18.1%
26.5%
22.1%
PBT
15.0%
-41.5%
13.6%
-18.7%
76.9%
47.2%
24.1%
33.8%
26.3%
PAT
20.9%
-49.7%
19.7%
21.9%
23.8%
47.2%
24.1%
33.8%
26.3%
Profit Margins
PAT Margin
Growth Rates
As a % of Sales
Raw Material Cost
23.6%
24.5%
27.7%
28.5%
20.2%
25.4%
24.9%
25.3%
24.7%
25.2%
Power Cost
34.1%
37.9%
31.7%
28.0%
33.4%
31.0%
30.8%
31.7%
31.2%
31.2%
Employee Cost
17.7%
12.2%
15.1%
17.0%
24.6%
20.5%
22.2%
21.7%
22.2%
21.7%
Other manufacturing business
2.5%
1.4%
0.2%
2.8%
1.7%
1.6%
1.6%
1.6%
1.6%
1.6%
Admin & Misc Expenses
3.0%
2.9%
3.4%
2.8%
2.0%
1.8%
1.5%
1.3%
1.1%
1.0%
Current Ratio
1.52x
1.37x
1.53x
1.85x
1.50x
1.70x
1.75x
1.81x
1.91x
2.00x
Quick Ratio
1.51x
1.36x
1.53x
1.85x
1.49x
1.69x
1.74x
1.79x
1.89x
1.99x
ROAE
23.1%
9.9%
9.9%
10.2%
11.4%
14.8%
15.8%
18.0%
18.9%
Pre Tax ROACE
34.3%
25.7%
22.7%
18.4%
22.5%
25.8%
26.5%
28.6%
29.1%
Post Tax ROACE
26.9%
20.1%
17.7%
14.4%
17.6%
20.2%
20.8%
22.3%
22.8%
9.1%
3.9%
4.6%
4.6%
5.0%
7.2%
7.9%
9.2%
10.0%
Liquidity Ratio
Return Ratio
ROAA
Leverage Ratio
Debt/ Equity
0.5x
0.6x
0.4x
0.3x
0.3x
0.3x
0.2x
0.2x
0.2x
0.1x
Debt/ EBITDA
1.4x
1.5x
1.1x
1.2x
1.4x
1.0x
0.8x
0.7x
0.6x
0.5x
Interest Coverage
5.8x
3.7x
1.9x
2.1x
1.9x
2.7x
3.5x
4.1x
5.0x
5.8x
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Valuation and Peers
EXIT VALUATION ON CURRENT MULTIPLES
On the basis of EV/ EBITDA
Sl. No.
Parameter
A
[+] Cash & Cash
equivalent
[-] Working
Capital Loan
Equity
Value
Multiple (x)
EBITDA
EV
Price Per share
Exit in 2017
8.5x
62
528
50
78
495
219
B
Exit in 2018
8.5x
73
616
40
82
573
254
C
Exit in 2019
8.5x
91
766
56
86
736
326
D
Exit in 2020
8.5x
110
926
74
90
909
402
Trading Comparables
Sl. No.
Company
(As on April 22, 2016)
Mkt
Cap
(Rs.
Crores)
EV (Rs.
Crores)
FY2
EPS
Growth
(%)
Return
on
Equity
(%)
Total
Debt
(Rs.
Crore)
TTM
FY1
FY2
TTM
FY1
Debt /
Equity
6.67
6.30
22.03
17.93
11.91
3.02
4.40
3,369
2.3
16.89
24.38
23.32
-4.51
6.16
11,899
16.0
28.85
20.96
16.32
164.72
3.91
3,390
0.9
-14.57
7,141
7.7
-84.16
2.46
4,184
4.5
EV/ EBITDA (x)
P/ E (x)
1
Simplex Infrastructures Ltd
1,375
4,611
8.08
2
Hindustan Construction Co
1,671
5,873
7.08
3
NCC Ltd
4,106
6,026
8.45
4
Punj Lloyd Ltd
779
5,295
5
Supreme Infrastructure India
277
2,004
8.05
13.50
6
J.Kumar Infraprojects Ltd
2,165
2,489
9.85
18.04
19.81
15.27
4.90
13.84
515
0.7
7
KNR Constructions Ltd
1,549
1,577
10.88
10.28
21.22
15.46
15.36
19.74
13.49
768
0.9
8
IL&FS Transportation Network
2,628
11,219
-21.42
7.70
23,513
3.9
5.85
5.24
45.92
7.27
16.02
4.56
3.92
8.90
Mean
9.8x
6.8x
13.7x
18.5x
19.7x
16.4x
Median
8.5x
6.3x
6.3x
18.0x
19.8x
15.4x
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.
Medici Firma | Buy Side Coverage as of May 12, 2016 | Ravi Kataria
Credits:
Ravi Kataria
Vice President – Medici Firma
www.medicifirma.com
rkataria@medicifirma.com
+919726061617
© 2016 Medici Firma. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The
information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +919726061617. To license the research, call +919726061617. See last page for important disclosures.