PINC 'hold' on Consolidated Construction

PINC has downgraded recommendation to 'hold' on Consolidated Construction Consortium Ltd and lowered earnings estimates by 15 per cent in FY09 & 20 per cent in FY10. Though the stock has undergone a steep correction over the past couple of months, it appears fairly valued at the current levels vis-a-vis our DCF valuation.

At the CMP of Rs 300, Consolidated Construction trades at a P/E of 6.3 times and EV/EBIDT of 4.8 times its FY10E earnings. The overall economic slowdown impacted CCCL's project execution in Q2FY09 owing to delays by its commercial & industrial clients. Pinc believes such delays to persist and impact its performance over the next 8-10 months.

Consolidated Construction's Q2FY09 results were below PINC's expectations. The company posted net sales of Rs 470 crore (+21.9% YoY). OPM for the quarter dipped to 6.8 per cent (down 189bps YoY). Net profits stood at Rs19.1 crore (down 36.9% YoY).

The company's order book stands at Rs 2,640 crore as on Sep 30, 2008 (+44.7% YoY). Additionally, it stands L1 for orders worth Rs 700 crore. Fresh order inflows for the quarter continued to be robust at Rs 290 crore. Around 82 per cent of the order backlog is hedged against commodity price fluctuations with either basic price protection or material supplied by clients, remaining being fixed price contracts. The present order book is executable over a period of 15-18 months.

The company, in JV with Herve Pomerleau International Inc, Canada, bagged the Chennai Airport project worth Rs 1200 crore from Airports Authority of India. The project involves development of Kamaraj Domestic Terminal Phase II, expansion of existing Anna International Terminal and face lifting of the existing terminals at Chennai airport. In addition, the company also secured a Cargo complex project at Chennai airport for Rs680mn and allied services work at Tiruvananthapuram for Rs 41 crore.