3QFY2012 Result Update | Infrastructure
January 20, 2012
HCC NEUTRAL
CMP `21
Performance Highlights Target Price -
Y/E March (` cr) 3QFY12 3QFY11 % chg (yoy) 2QFY12 % chg (qoq) Investment Period -
Net sales 946.0 1,008.6 (6.2) 828.6 14.2
Stock Info
Operating profit 110.5 132.0 (16.3) 93.7 17.9
Sector Infrastructure
Net profit (130.4) 7.9 - (40.5) -
Market Cap (` cr) 1,280
Source: Company, Angel Research
Beta 1.5
For 3QFY2012, HCC’s reported poor set of results with, revenue and EBITDAM 52 Week High / Low 43/16
coming in line with our and street estimates, however earnings plunged on
Avg. Daily Volume 987,462
account of provisions (expected future losses and cost revisions) to the tune of
Face Value (`) 1
`166cr. We believe these provisions are not exceptional in nature, as classified by
BSE Sensex 16,739
the company and pertain to normal course of business. As of 3QFY2012, the
Nifty 5,049
total outstanding order book stands at `16,240cr (excluding L1 orders of
Reuters Code HCNS.BO
`1,574cr) with order inflow of ~`840cr in the quarter. Owing to concerns such as
slowdown in order inflow, high debt and stretched working capital, we remain Bloomberg Code HCC@IN
Neutral on the stock.
Provisions lead to huge loss: On the top-line front, HCC’s revenues declined by Shareholding Pattern (%)
6.2% yoy to `946.0cr (`1,009cr) against our estimate of `982.0cr due to Promoters 39.9
slowdown in order inflow and execution bottlenecks. EBITDAM came in at 11.7% MF / Banks / Indian Fls 11.5
(12.6%), a dip of 90bp yoy and marginally lower than our estimate of 11.9%. On FII / NRIs / OCBs 24.6
the earnings front, HCC reported a loss of `130.4cr vs. profit of `7.9cr in
Indian Public / Others 24.1
3QFY11, against our estimate of loss of `25.5cr owing to decline in revenue,
EBITDA margin and provisioning of `166cr. Interest cost came at `104.3cr, a
decline of 39.4%/2.9% on yoy/qoq basis. Abs. (%) 3m 1yr 3yr
Outlook and valuation: On the valuations front, at current levels, the stock trades Sensex (1.2) (12.1) 83.9
at 32.8x PE and 1.0x P/BV on FY2013E on standalone basis. We have valued HCC (22.6) (48.3) (6.2)
HCC on an SOTP basis with a fair value of `32/share by assigning 6x FY2013E
earnings (standalone). The company’s real estate venture has been valued on
NAV basis and its BOT assets have been valued on FCFE basis. Our fair value
implies an upside of 51.2% from current levels, but we continue to maintain our
Neutral recommendation on the stock, owing to concerns mentioned above.
Further, in the infrastructure space, we believe there are better bets than HCC
such as L&T, Sadbhav and IVRCL.
Key financials (Standalone)
Y/E March (` cr) FY2010 FY2011 FY2012E FY2013E
Net sales 3,644 4,093 3,915 4,633
% chg 10.0 12.3 (4.3) 18.3
Adj. net profit 81 71 (187) 39
% chg 7.2 (12.8) - -
EBITDA (%) 12.2 13.2 12.0 12.6
FDEPS (`) 1.3 1.2 (3.1) 0.6
Shailesh Kanani
P/E (x) 15.7 18.0 - 32.8
022-39357800 Ext: 6829
P/BV (x) 0.8 0.8 1.0 1.0
shailesh.kanani@angelbroking.com
RoE (%) 6.5 4.7 - 3.1
RoCE (%) 8.6 8.3 5.4 7.1
Nitin Arora
EV/Sales (x) 1.0 1.1 1.4 1.1
022-39357800 Ext: 6842
EV/EBITDA (x) 8.1 8.4 11.9 8.6
nitin.arora@angelbroking.com
Source: Company, Angel Research
Please refer to important disclosures at the end of this report 1
HCC | 3QFY2012 Result Update
Exhibit 1: 3QFY2012 performance (Standalone)
Y/E March (` cr) 3QFY12 3QFY11 % chg(yoy) 2QFY12 % chg(qoq) 9MFY12 9MFY11 % chg(yoy)
Income from operations 946.0 1,009 (6.2) 828.6 14.2 2,833 2,882 (1.7)
Total expenditure 835.6 876.6 (4.7) 734.9 13.7 2,490 2,517 (1.1)
Operating profit 110.5 132.0 (16.3) 93.7 17.9 342.1 364.9 (6.3)
OPM (%) 11.7 13.1 (140)bp 11.3 40bp 12.1 12.7 (60)bp
Interest 104.3 74.8 39.4 107.4 (2.9) 305.0 199.6 52.8
Depreciation 41.2 38.2 8.0 41.4 (0.4) 121.9 108.7 12.1
Other income 10.2 (5.6) (280.2) (3.0) (437.9) 7.9 3.6 121.2
Nonrecurring items (166.3) - - - - (166.3) - -
Profit before tax (191.3) 13.4 - (58.1) - (243.3) 60.2 -
Tax (60.9) 5.5 - (17.6) - (75.2) 17.9 -
PAT (130.4) 7.9 - (40.5) - (168.1) 42.3 -
PAT (%) (13.8) 0.8 - (4.9) - (5.9) 1.5 -
FDEPS (`) (2.1) 0.1 - (0.7) - (2.8) 0.7 -
Source: Company, Angel Research
Exhibit 2: 3QFY2012 Actual vs. Angel estimates
(` cr) Actual Estimates Variation (%)
Revenues 946 982 (3.7)
EBITDA 110.5 116.9 (5.5)
Interest 104.3 112.8 (7.5)
Tax (60.9) (12.2) 396.8
PAT (130.4) (25.5) 411.3
Source: Company, Angel Research
Muted performance on revenue front, as expected
On the top-line front, HCC’s revenues declined by 6.2% yoy to `946.0cr
(`1,009cr) against our estimate of `982.0cr. As per management, revenue has
declined due to slow order inflow in last few quarters, execution bottlenecks, rising
interest cost and payment delays by clients. Further, the infrastructure sector is
facing strong headwinds which include slowdown in order activity caused by
shortfall in investments in infrastructure sector and a high interest rate scenario
which will keep revenue growth under check for next few quarters. Against this
backdrop and due to poor performance in 3QFY2012 we are lowering our
FY2012 revenue estimate by 5.7% to `3,915cr from `4,152cr.
January 20, 2012 2
HCC | 3QFY2012 Result Update
Exhibit 3: Decline in revenues due to slowdown on execution front
1,400 20.4 25.0
18.3
1,200 20.0
14.1 13.2
1,000 10.2 10.8 11.1 10.8 15.0
9.3
800 6.3 10.0
600 0.8 5.0
400 0.0
(7.2) (6.3) (5.6)
200 (5.0)
0 (10.0)
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
Sales (` cr, LHS) Growth (yoy %, RHS)
Source: Company, Angel Research
Projects update
For Dhule-Palasner project, HCC has received clearance for commissioning of
Dhule-Palasner project from NHAI. The company expects to achieve commercial
operational date (COD) by February 2012 which is four months ahead of
scheduled COD - June 2012.
Lavasa Update
In latest development on the Lavasa project, the Ministry of Environment and
Forest (MOEF), through its order dated 9th November, 2011 accorded environment
clearance to the 1st phase of Lavasa. Construction has resumed at the project site
and the company is in the process of getting the project site fully mobilised. As per
the management, mobilisation should be completed by June 2012. However, the
complete project still remains under the cloud of uncertainty as the MOEF
clearance received is for Phase 1 only, along with with uncertainty on fund raising
owing to unfavorable market conditions and high debt in books of Lavasa.
Lower EBITDA, high interest cost and provisioning leads to loss
EBITDAM came in at 11.7% (12.6%), a dip of 90bp yoy and marginally lower than
our estimate of 11.9%. On the earnings front, HCC reported a loss of `130.4cr vs
profit of `7.9cr in 3QFY11, against our estimate of loss of `25.5cr owing to
decline in revenue, EBITDA margin and provisioning of `166cr. Interest cost came
at `104.3cr, a decline of 39.4%/2.9% on yoy/qoq basis.
Provisioning of `166cr includes: 1) `64.9cr additional cost on account of
substantial delays in approval of claims, increase in estimated costs and delays in
execution; 2) `52cr provision made for expected future losses in respect of two new
projects; 3) `16cr provision arising from revision of cost to completion for expected
future loss on sale of asset and the impact of adverse exchange rates of an
overseas project; 4) `27cr provision made against performance bank guarantee
wrongfully encashed by a client in earlier year and is currently under dispute. As
the arbitration is not expected to settle soon, company has made provision for the
same; 5) `6.7cr provision made against dues from a subcontractor.
January 20, 2012 3
HCC | 3QFY2012 Result Update
Although HCC has classified the provisions of `166cr as exceptional items, we
believe these pertain to normal course of business.
Exhibit 4: EBITDAM take a hit Exhibit 5: Poor performance on all fronts led to loss
180.0 15.4 18.0 80.0 10.0
160.0 14.0 13.8 16.0 60.0 5.2
12.9 12.9 13.0 12.6 12.8 12.6 13.0 4.0
140.0 14.0 40.0 3.1 2.8
11.3 11.3 11.3 11.7 2.1
2.8 5.0
120.0 12.0 20.0 0.7
1.6 1.4 0.8 1.9
0.3
100.0 10.0 0.0
‐
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
80.0 8.0 (20.0)
(4.9)
60.0 6.0 (40.0)
(5.0)
40.0 4.0 (60.0)
20.0 2.0 (80.0)
0.0 0.0 (100.0) (10.0)
(13.8)
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
(120.0)
(140.0) (15.0)
EBITDA (`cr, LHS) EBITDAM (%, RHS) PAT (` cr, LHS) PATM (%, RHS)
Source: Company, Angel Research Source: Company, Angel Research
Order book analysis
HCC’s order book, as of 3QFY2012, stood at `16,240cr (4.0x FY2011 revenue) –
excluding L1 orders worth `1,574cr, – with the company bagging orders worth
~`840cr during the quarter. The company’s order book comprises hydro power
(39%), water solutions (23%), transportation (24%) and nuclear and special (14%)
projects. The company is L1 for contracts worth `1,574cr.
Exhibit 6: Order booking and order book trend Exhibit 7: Segmental order book break-up (%)
19,500 60.0
42.4
34.5 32.1
14,500
26.3 29.2 30.8 40.0
20.4
16.7
9,500 12.2 13.0 20.0
(4.0) (2.3) (2.0)
4,500 (9.1) 0.0
(500) (20.0)
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
3QFY12
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
Order Book (` cr, LHS) Order Inflow (` cr, LHS)
L1 Status (` cr, LHS) Order Book growth (%, RHS)
Source: Company, Angel Research Source: Company, Angel Research
January 20, 2012 4
HCC | 3QFY2012 Result Update
Outlook and valuation
Owing to HCC’s poor performance in 3QFY2012 and given headwinds faced by
infrastructure sector we are revising our estimates downwards for FY2012. On the
top line front, we have lowered our estimates by 5.7% for FY2012 to `3,915cr
from `4,152cr. On the EBITDAM front, we have lowered our estimates by 40bp to
12.0% from 12.4%. We expect HCC to post loss of `187.4cr for FY2012 at
earnings level owing to the provisions of `166cr in 3QFY12.
Exhibit 8: Change in estimates
FY2012E FY2013E
Earlier estimates Revised estimates Variation (%) Earlier estimates Revised estimates Variation (%)
Revenue (` cr) 4,152 3,915 (5.7) 4,633 4,633 -
EBITDA margin (%) 12.4 12.0 (40)bp 12.6 12.6 -
PAT (` cr) (57.7) (187.4) 224.7 39.0 39.0 -
Source: Company, Angel Research
On the valuations front, at current levels, the stock trades at 32.8x PE and 1.0x
P/BV on FY2013E on standalone basis. We have valued HCC on an SOTP basis
with a fair value of `32/share by assigning 6x FY2013E earnings (standalone). The
company’s real estate venture has been valued on NAV basis and its BOT assets
have been valued on DCF basis. Our fair value implies an upside of 51.2% from
current levels, but we continue to maintain our Neutral recommendation on the
stock, owing to structural concerns faced by the company. Further, in the
infrastructure space, we believe there are better bets than HCC such as L&T,
Sadbhav and IVRCL.
Exhibit 9: SOTP valuation summary
Business Segment Methodology Remarks `/share
Construction P/E 6.0x FY2013E earnings 3.9
Value of Real Estate NAV Basis NAV Basis 11.7
HCC Concessions 30% Discount to PE deal, valuing it at `1,650cr 16.3
Total 31.9
Source: Company, Angel Research
Exhibit 10: Key assumptions
` cr FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
Order inflow 3,929 7,616 6,054 3,410 3,871 4,897
Revenue 3,083 3,314 3,644 4,093 3,915 4,633
Order backlog (Y/E) 10,158 14,460 16,870 16,187 16,143 16,406
Order book-to-Sales ratio (x) 3.3 4.4 4.6 4.0 4.1 3.5
Source: Company, Angel Research
January 20, 2012 5
HCC | 3QFY2012 Result Update
Recommendation rationale
Huge investments and elongated working capital = Balance sheet stretched:
HCC’s balance sheet is loaded with debt (~`4,300cr as of 3QFY2012; net D/E =
2.7 – standalone level) because of its BOT/real estate investments and funding of
its working capital requirements (~328 days as on 9MFY2012). Going ahead as
well, owing to its commitments, we believe HCC will not get any respite on these
fronts.
Deteriorating business environment: Slowdown on the execution front, along with
macro headwinds faced by the sector, has resulted in eroding the company’s
profitability. Further, the fact that there are no signs of reversal in sight paints a
bleak outlook for the company in the medium term.
Uncertainty on the Lavasa project: Lavasa received clearance for the construction
and development for Phase 1 in November 2011, post one year of legal battle
with MOEF, which resulted in huge losses to HCC. However, the project still
remains under the cloud of uncertainty and continues to be an overhang on the
stock.
January 20, 2012 6
HCC | 3QFY2012 Result Update
Exhibit 11: Recommendation summary
Company CMP TP Rating Top line (` cr) EPS (`) Adj. P/E OB/
FY11 FY12E FY13E CAGR (%) FY11 FY12E FY13E CAGR (%) FY11 FY12E FY13E Sales (x)
ABL 205 245 Buy 1,302 1,627 1,831 18.6 19.2 21.0 24.7 13.6 10.7 9.7 8.3 5.0
CCCL 17 - Neutral 2,199 2,350 2,451 5.6 2.5 (1.1) 1.6 (20.5) 6.6 - 10.5 2.7
HCC 21 - Neutral 4,093 3,915 4,633 6.4 1.2 (3.1) 0.6 (25.8) 18.0 - 32.8 4.0
IRB Infra 162 182 Accu. 2,438 3,037 3,781 24.5 13.6 11.9 13.1 (2.1) 11.9 13.6 12.4 -
ITNL 187 227 Buy 4,049 5,169 6,609 27.8 22.3 24.4 25.7 7.4 8.4 7.6 7.2 5.2
IVRCL 44 47 Accu. 5,651 5,598 6,458 6.9 5.9 3.8 4.6 (11.5) 7.4 11.6 9.5 4.5
JP Assoc. 67 88 Buy 13,832 13,763 16,017 7.6 5.5 2.7 4.2 (12.6) 12.2 24.5 16.0 -
L&T 1,274 1,460 Buy 43,905 53,503 60,090 17.0 54.3 64.2 71.0 14.3 23.5 19.8 17.9 3.2
Madhucon 52 77 Buy 1,816 1,952 2,503 17.4 5.6 4.4 4.7 (8.1) 9.3 11.8 11.1 3.8
NCC 49 52 Accu. 5,074 5,095 5,749 6.4 6.4 3.6 3.8 (22.4) 7.6 13.7 12.7 3.4
Patel Engg 96 - Neutral 3,476 3,271 3,586 1.6 17.6 14.0 14.5 (9.2) 5.5 6.9 6.7 2.7
Punj Lloyd 49 - Neutral 7,850 9,585 10,592 16.2 (5.4) 1.9 2.9 - - 25.8 16.8 3.3
Sadbhav 118 150 Buy 2,209 2,602 2,585 8.2 8.0 9.1 9.0 6.0 14.7 12.9 13.1 2.8
Simplex In. 201 233 Buy 4,889 5,562 6,485 15.2 21.5 18.9 25.9 9.8 9.3 10.6 7.8 3.1
Source: Company, Angel Research
Exhibit 12: SOTP break up
Company Core Const. Real Estate Road BOT Invst. In Subsidiaries Others Total
` % to TP ` % to TP ` % to TP ` % to TP ` % to TP `
ABL 104 42 - - 141 58 - - - - 245
CCCL 17 100 - - - - - - - - 17
HCC 4 12 12 37 16 51 - - - - 32
IRB Infra 116 64 - - 61 34 4 2 - 182
ITNL 59 26 - - 143 63 - - 25 11 227
IVRCL 32 67 - - - - 15 33 - - 47
JP Assoc. 31 35 24 27 - - - - 33 37 88
L&T 1,136 78 - - - - 324 22 - - 1,460
Madhucon 23 30 2 3 52 67 - - - 78
NCC 23 45 2 4 8 16 - - 18 36 52
Patel Engg 42 45 17 18 16 17 - - 19 21 94
Punj Lloyd 47 100 - - - - - - - - 47
Sadbhav 81 54 - - 70 46 - - - - 150
Simplex In. 233 100 - - - - - - - - 233
Source: Company, Angel Research
January 20, 2012 7
HCC | 3QFY2012 Result Update
Profit & loss statement (Standalone)
Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
Net sales 3,083 3,314 3,644 4,093 3,915 4,633
Other operating income - - - - - -
Total operating income 3,083 3,314 3,644 4,093 3,915 4,633
% chg 30.8 7.5 10.0 12.3 (4.3) 18.3
Total Expenditure 2,716 2,882 3,201 3,553 3,446 4,050
Net Raw Materials 971 1,236 1,060 1,222 1,215 1,411
Other Mfg costs 1,448 1,271 1,747 1,864 1,783 2,110
Personnel 297 375 394 468 447 529
Other - - - - - -
EBITDA 367 431 443 540 470 583
% chg 70.3 17.7 2.6 21.9 (13.0) 24.2
(% of Net Sales) 11.9 13.0 12.2 13.2 12.0 12.6
Depreciation& Amortisation 96 115 114 153 170 186
EBIT 270 316 329 387 300 397
% chg 99.5 16.9 4.0 17.7 (22.5) 32.4
(% of Net Sales) 8.8 9.5 9.0 9.5 7.7 8.6
Interest & other Charges 152 211 205 290 411 355
Other Income 2 9 13 17 12 17
(% of PBT) 1.9 8.2 10.7 15.2 (12.0) 28.9
Share in profit of Associates - - (15) (3) - -
Recurring PBT 120 115 122 112 (99) 59
% chg 28.8 (4.3) 5.8 (8.4) (188.8) (159.3)
Extraordinary Expense/(Inc.) 36 49 - - (166) -
PBT (reported) 157 165 122 112 (266) 59
Tax 47 39 40 41 (78) 20
(% of PBT) 30.1 23.8 33.2 36.4 29.4 33.6
PAT (reported) 110 125 81 71 (187) 39
Add: Share of asso. - - - - - -
Less: Minority interest (MI) - - - - - -
Prior period items - - - - - -
PAT after MI (reported) 110 125 81 71 (187) 39
ADJ. PAT 73 76 81 71 (187) 39
% chg 33.3 3.9 7.2 (12.8) - -
(% of Net Sales) 2.4 2.3 2.2 1.7 (4.8) 0.8
Basic EPS (`) 2.9 3.0 2.7 1.2 (3.1) 0.6
Fully Diluted EPS (`) 1.2 1.3 1.3 1.2 (3.1) 0.6
% chg 33.3 3.9 7.2 (12.8) - -
January 20, 2012 8
HCC | 3QFY2012 Result Update
Balance sheet (Standalone)
Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
SOURCES OF FUNDS
Equity Share Capital 25.6 25.6 30.3 60.7 60.7 60.7
Preference Capital - - - - - -
Reserves& Surplus 978 979 1,502 1,462 1,225 1,201
Shareholder’s Funds 1,004 1,005 1,517 1,522 1,271 1,246
Minority Interest - - - - - -
Total Loans 1,845 2,322 2,515 3,471 4,436 3,878
Deferred Tax Liability 113 113 143 166 166 166
Total Liabilities 2,962 3,440 4,174 5,160 5,873 5,290
APPLICATION OF FUNDS
Gross Block 1,410 1,683 1,814 1,987 2,161 2,370
Less: Acc. Depreciation 457 555 664 803 973 1,159
Net Block 953 1,128 1,150 1,184 1,189 1,211
Capital Work-in-Progress 68 46 35 26 62 63
Goodwill - - - - - -
Investments 296 366 409 531 627 740
Current Assets 2,710 3,467 4,624 6,096 6,817 7,257
Cash 264 154 188 194 105 141
Loans & Advances 295 528 863 1,395 1,812 2,074
Other 2,150 2,785 3,573 4,508 4,899 5,042
Current liabilities 1,064 1,568 2,043 2,677 2,820 3,980
Net Current Assets 1,646 1,900 2,581 3,419 3,996 3,277
Misc. Exp. not written off - - - - - -
Total Assets 2,962 3,440 4,174 5,160 5,873 5,290
January 20, 2012 9
HCC | 3QFY2012 Result Update
Cash flow statement (Standalone)
Y/E March (` cr) FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
Profit before tax 157 165 122 112 (266) 59
Depreciation 96 115 114 153 170 186
Change in Working Capital 175 364 647 832 666 (755)
Less: Other income 2 9 13 17 12 17
Direct taxes paid 47 39 40 41 (78) 20
Cash Flow from Operations 28 (133) (465) (625) (695) 963
(Inc.)/ Dec. in Fixed Assets (225) (252) (120) (164) (210) (210)
(Inc.)/ Dec. in Investments (67) (70) (43) (123) (96) (113)
(Inc.)/ Dec. in loans and adv. - - - - - -
Other income 2 9 13 17 12 17
Cash Flow from Investing (289) (313) (150) (270) (294) (306)
Issue of Equity - (71) 459 (38) - -
Inc./(Dec.) in loans 294 477 193 957 965 (558)
Dividend Paid (Incl. Tax) (24) (24) (28) (28) (64) (64)
Others 48 (47) 25 10 - -
Cash Flow from Financing 317 335 649 901 901 (622)
Inc./(Dec.) in Cash 56 (111) 34 5 (88) 35
Opening Cash balances 208 264 154 188 194 105
Closing Cash balances 264 154 188 194 105 141
January 20, 2012 10
HCC | 3QFY2012 Result Update
Key Ratios
Y/E March FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
Valuation Ratio (x)
P/E (on FDEPS) 17.5 16.9 15.7 18.0 - 32.8
P/CEPS 7.6 6.7 6.6 5.7 - 5.7
P/BV 1.3 1.3 0.8 0.8 1.0 1.0
Dividend yield (%) 3.8 3.8 3.8 4.3 4.3 4.3
EV/Sales 0.9 1.0 1.0 1.1 1.4 1.1
EV/EBITDA 7.8 8.0 8.1 8.4 11.9 8.6
EV / Total Assets 1.0 1.0 0.9 0.9 1.0 0.9
Order book to sales 2.7 4.4 4.6 4.0 4.1 3.5
Per Share Data (`)
EPS (Basic) 2.9 3.0 2.7 1.2 (3.1) 0.6
EPS (fully diluted) 1.2 1.3 1.3 1.2 (3.1) 0.6
Cash EPS 2.8 3.2 3.2 3.7 (0.3) 3.7
DPS 0.8 0.8 0.8 0.9 0.9 0.9
Book Value 16.6 16.6 25.0 25.1 21.0 20.5
DuPont Analysis
EBIT margin 8.8 9.5 9.0 9.5 7.7 8.6
Tax retention ratio 0.7 0.8 0.7 0.6 0.7 0.7
Asset turnover (x) 1.2 1.1 1.0 0.9 0.7 0.8
ROIC (Post-tax) 7.5 8.1 6.0 5.5 3.9 4.8
Cost of Debt (Post Tax) 6.3 7.7 5.7 6.2 7.3 5.7
Leverage (x) 1.5 1.9 1.8 1.8 2.8 3.2
Operating ROE 9.4 8.7 6.7 4.3 - 2.1
Returns (%)
ROCE (Pre-tax) 9.8 9.9 8.6 8.3 5.4 7.1
Angel ROIC (Pre-tax) 10.8 10.6 9.0 8.6 5.6 7.3
ROE 7.7 7.6 6.5 4.7 - 3.1
Turnover ratios (x)
Asset Turnover (Gross Block) 2.5 2.1 2.1 2.2 1.9 2.0
Inventory / Sales (days) 230 271 318 360 438 391
Receivables (days) 0 1 1 0.4 0 0
Payables (days) 125 153 186 229 283 299
Work. cycle (ex-cash) (days) 153 172 207 250 332 277
Solvency ratios (x)
Net debt to equity 1.6 2.2 1.5 2.2 3.4 3.0
Net debt to EBITDA 4.3 5.0 5.3 6.1 9.2 6.4
Interest Coverage 1.8 1.5 1.6 1.3 0.7 1.1
January 20, 2012 11
HCC | 3QFY2012 Result Update
Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angeltrade.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
the past.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please
refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and
its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement HCC
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.
Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
January 20, 2012 12