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CC COnstrucions Q1FY09 RU1

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					 India Equity Research I Construction | Institution         Result Update Small Cap)



C&C Constructions                                                    INR: 109
                                                                       BUY

 Riding smooth on rough terrains                                    BUY

We have analyzed the Q1FY09 results of IVRCL & our key findings are:                    Price Outlook (INR): 137
Q1FY09 Results – Key highlights                                                         Market Data                                                   November 14, 2008

•      Robust growth in topline- Company’s sales increased by 162% y-                      Shares outs (Cr)                                                                                              1.83
       o-y to Rs 129 crore on the back of strong order book position.
                                                                                           Equity Cap (Rs. Cr)                                                                                           18.3
       Company’s current order book stands at Rs 2,100 crore. Road
                                                                                           Mkt Cap (Rs. Cr)                                                                                                    199
       Segment comprises 96% of the order book while Water & Sanitation
       and Buildings comprise of 2.5% and 1.5% of the order book                           52 Wk H/L (Rs)                                                                                            575/57
       respectively.                                                                       Avg Vol (1yr avg)                                                                                         37497
                                                                                           Face Value (Rs)                                                                                                     10
•      Operating margins decline - EBIDTA margins have witnessed a
                                                                                           Bloomberg Code                                                                                  CCON IN
       dip of 270 bps y-o-y, mainly due to an increase in raw material
       prices and construction expenditure. Construction expenses as a
                                                                                        Market Info:
       percentage of sales increased by 576bps, which was offset by                     SENSEX                                              :                                              9,385
       266bps fall in other expenditure. On a q-o-q basis the margins                   NIFTY                                               :                                              2,810
       improved by 640 bps, but it is not comparable as various one-offs
                                                                                        Price Performance
       affected the performance of the company in Q4FY08.
                                                                                         170
                                                                                         150
•      Interest expense hurting the bottom-line- Interest expense grew                   130

       by 558% y-o-y to Rs 15.4 crore, adversely affecting the PAT                       110
                                                                                          90
       margins of company. The PAT was flat at Rs 4.95 crores, while PAT                  70

       margins fell from 10.1% in Q1FY08 to just 3.84% in Q1FY09                          50
                                                                                          30




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                                                                                                                                                                                                      Oct-08
Financial Performance                                                    (Rs crore)
                                                                                                                          C&C Constructions                             BSE Sensex
                Q1FY09       Q1FY08         y-o-y (%)        Q4FY08       q-o-q (%)
                                                                                        Share Holding pattern (%)
 Net Sales         129.0           49.2          162.1           231.9          -44.3
                                                                                        Particulars                                30.09                            30.06                                 Chg
 EBITDA             24.6           10.7          129.7            29.1          -15.7
                                                                                        Foreign                                        57.6                             58.3                               -0.7
 PAT                  5.0           4.9               0.6         16.1          -69.3
                                                                                        Institutions                                   18.3                             17.7                                   0.6
 EPS                  2.7           2.7           56.8             8.8            8.8
                                                                                        Govt
 OPM (%)            19.0           21.7      (270 bps)            12.6        640bps    Holding /                                           9.6                           9.6                                       -
                                                                                        Promoter
 NPM (%)              3.8          10.0      (620 bps)             7.0      (320bps)
                                                                                        Other Corp
                                                                                                                                            7.3                           7.1                           0.23
                                                                                        Holding
Source: Company data, KRC Research
                                                                                        Public                                              7.3                           7.4                                  2.8
Valuations                                                                              Total                                      100.0                            100.0

At the CMP of Rs 109, C & C construction is trading at 4.9x TTM EPS of                  Analyst
Rs 22.4 and 3.3x FY09E EPS of Rs 33.5. We have revised our sales
                                                                                        Shreyas Mehta
estimates for the year upwards by 8.6% due to fresh inflow of orders.                   shreyas.mehta@krchoksey.com
However, we anticipate slowdown in order execution thus affecting the                   ℡ 91-22-6696 5203
topline. The EBITDA margins have been maintained owing to falling                       Rohit Gupta
commodity prices. An increase in debt levels of the company is                          rohit.gupta@krchoksey.com
                                                                                        ℡ 91-22-6696 5536
anticipated, which will impact the PAT margins of the company. We
therefore downgrade our target price from Rs 265 to Rs 137, maintaining                 www.krchoksey.com
                                                                                        ℡ 91-022-6696 5203
a BUY rating, with an upside potential of 25.6%                                           91-022-6691 9569




             KRC Research is also available on Bloomberg KRCS<GO>, Thomson First Call, Reuters, Factset and Capital IQ
C&C Constructions Ltd.


                           Result Analysis:


                            Particular                  Q1FY09   Q1FY08   y-o-y (%)    Q4FY08     q-o-q (%)

                            Net Sales                    129.0    49.2    162.1%        231.9      -44.3%

                            Other Income                  2.3     1.2      93.2%          3.7      -37.3%

                            Total Income                131.4     50.4    160.4%        235.6      -44.2%

                            Total Expenditure           104.5     38.5    171.1%        202.7      -48.5%
 Raw material expenses      Raw Material
                            Consumed/Cons exp            87.3     30.5    186.5%        179.1      -51.3%
 to remain at current
 levels                     as a % of sales             67.6%    61.9%                  77.2%

                            Employee Expenses            11.6     4.6     150.2%         15.6      -26.0%

                            as a % of sales              9.0%     9.4%                   6.7%

                            Other Expenses                5.6     3.4      62.7%          8.0      -29.8%

                            as a % of sales              4.3%     7.0%                   3.4%

                            PBIDT Excluding OI           24.6     10.7    129.7%         29.1      -15.7%

                            as a % of sales             19.0%    21.7%                  12.6%

                            PBIDT Including OI           26.9     11.9    126.0%         32.8      -18.1%

                            as a % of sales             20.8%    24.2%                  14.2%

 Interest cost to impact    Interest                     15.4     2.3     558.4%         12.6      21.8%
 the bottomline
                            PBDT                         11.5     9.6      20.3%         20.2      -43.1%

                            Depreciation                  5.3     4.1      30.1%          3.1      71.3%

                            PBT                           6.2     5.5      12.9%         17.1      -63.9%

                            Total Tax                     1.2     0.5     124.7%          1.0      25.8%

                            as a % of PBT               19.8%     9.9%                   5.7%

                            Reported Profit After Tax     5.0     4.9      0.6%          16.1      -69.3%

                            Net profit margin            3.8%    10.0%                   7.0%

                            EPS (Unit Curr.)              2.7     2.7                     8.8
                           Source: Company Data




2                                                                                     KRC Equity Research
C&C Constructions Ltd.


                         Financial Snapshot
                                                                                             (Rs crore)

                          Particulars                   FY2007           FY2008           FY2009E

Sales to grow by 34.4%    Net Sales                      330.4             533.3            857.1
in FY09                   Growth (%)                      56.1             61.4              60.7

                          EBIDTA (Excl OI)                71.6             92.9             161.7

                          Growth (%)                      34.4             29.7              74.1

                          Net Profit                      33.2             40.9              61.1

                          Growth (%)                      7.4              23.3              49.4

                          EPS (Rs.)                       20.6             22.4              33.5
EBIDTA margins to be
                          EBIDTM (%)                      21.7             17.4              18.9
maintained
                          NPM (%)                         10.0              7.7              7.1
                         Source: Company Data, KRC Research

                         VALUATIONS

                         At the CMP of Rs 109, C & C construction is trading at 4.9x TTM EPS of Rs 22.4 and
                         3.3x FY09E EPS of Rs 33.5. We have revised our sales estimates for the year upwards
                         by 8.6% due to fresh inflow of orders. However, we anticipate slowdown in order
                         execution thus affecting the topline. The EBITDA margins have been maintained owing
                         to falling commodity prices. An increase in debt levels of the company is anticipated,
                         which will impact the PAT margins of the company. We therefore downgrade our target
                         price from Rs 265 to Rs 137, maintaining a BUY rating, with an upside potential of
                         25.6%




3                                                                                        KRC Equity Research
C&C Constructions Ltd.



    Rajiv Choksey                                 Institutional Sales                                                           rajiv.choksey@krchoksey.com            +91-22-6653 5135

    Anuj Choksey                                  Institutional Sales                                                           anuj.choksey@krchoksey.com             +91-22-6696 5500

    Poran Das                                     Institutional Sales                                                           poran.das@krchoksey.com                +91-22-6696 5548

    Alok Agarwal                                  Institutional Research                                                        alok.agarwal@krchoksey.com             +91-22-6696 5502


                                                                                                                                                              In next 12 months,
    C&C Constructions                                                                                                                    Rating
                                                                                                                                                              expected to :
      350
                                                                                                                                         Buy                  Appreciate over 15%
      270
                                                                                 BUY
                                                                                                                                         Accumulate/Hold      Appreciate upto 15%
      190                                                                                                                      BUY


      110
                                                                                                                                         Reduce               Depreciate upto 10%
       30
            Nov-07




                              Jan-08




                                                  Mar-08




                                                                      May-08


                                                                                Jun-08


                                                                                         Jul-08




                                                                                                                                Nov-08
                     Dec-07




                                       Feb-08




                                                            pr-08




                                                                                                   ug-08


                                                                                                              ep-08


                                                                                                                      Oct-08




                                                                                                                                         Sell                 Depreciate over 10%
                                                           A




                                                                                                  A


                                                                                                             S




Other Stocks in the sector under our active coverage: Construction

                                                                                                                                             Last                           Reco    Target
 Analyst                               Ticker                        Equity                                Recommendation                              Status    BARR*
                                                                                                                                            Report                          Price    Price
 Shreyas Mehta                         PEL IN                        Patel Engg.                                      Buy                  06-Nov-08   Active      4th        169         347

                                                                                                                                                                    rd
 Rohit Gupta                           IVRCL IN                      IVRCL Infra                                      Buy                  11-Nov-08   Active      3          140         198
Source : Bloomberg, KRC Research
*BARR : Bloomberg Absolute Return Rank

_______________________________________________________________________________________________________________

Disclaimer:
This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy
or sell a security. While the information contained therein has been obtained from sources believed to be reliable, investors
are advised to satisfy themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt Ltd., does not
bear any responsibility for the authentication of the information contained in the reports and consequently, is not liable for
any decisions taken based on the same. Further, KRC Research Reports only provide information updates and analysis. All
opinion for buying and selling are available to investors when they are registered clients of KRC Investment Advisory
Services. As per SEBI requirements it is stated that, Kisan Ratilal Choksey Shares & Sec Pvt Ltd., and/or individuals thereof
may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation.
_______________________________________________________________________________________________________________

                                                                         Please send your feedback to krc.research@krchoksey.com

                                                                                                    Visit us at www.krchoksey.com

                                                                               Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.

                                                                                          Registered Office:
                                                                    1102, Stock Exchange Tower, Dalal Street, Fort, Mumbai – 400 001.
                                                                             Phone: 91-22-6633 5000; Fax: 91-22-6633 8060.

                                                                                  Branch Office:
                                                ABHISHEK, 5th Floor, Link Road, Dalia Industrial Estate, Andheri (W), Mumbai – 400 058.
                                                                  Phone: 91-22-6696 5555; Fax: 91-22-6691 9576.


4                                                                                                                                                                         KRC Equity Research

				
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