Q1FY23 revenue from operations was up 47% y/y to Rs9.9bn, on a combination of gradually improving pace of execution at the FY22 orders-added and Covid-impacted base of last year. Sequentially, it declined 11%, and could mostly be attributed to the seasonality involved with the business.
On a combination of inflationary pressures and change in mix, gross margin compressed 445bps y/y (and 124bps q/q) to 32.6%. However, a large part of the y/y pressure in gross margin was made good by operating leverage and lower other operating expenses helped sequentially. Consequently, EBITDA margin, at 14.1%, contracted 21bps y/y (and 16bps q/q).
Net income was at Rs619m, up 93% y/y but down 16% q/q. The y/y improved performance was mostly on a significantly better scale, and was further helped by contained depreciation and higher other income. Sequential dip is mostly on seasonality impacted by lower scale of operations.
During the quarter, it secured two orders with an aggregate EPC value of Rs13.7bn. One of the projects was from Ircon International for construction of a road project worth Rs10.7bn, and it has also secured a Rs3bn (company’s share) sewage disposal project from BMC.
With these new orders and adjusted for the Q1FY23 works executed, order backlog at end Q1FY23 was Rs120.9bn. This gives us a revenue visibility of 3.1x TTM revenues.
In its OB, metros, at 57%, continue to account for lion’s share. This is followed by Flyover, bridges & tunnels (35%), Water (7%) and the balance is from the Civil segment. Maharashtra accounted for 69% of the OB, followed by Delhi (23%), Gujarat (7%) and the balance from Uttar Pradesh.
Q1FY23 gross debt stood at Rs4.69bn, up Rs0.37bn q/q. The rise, we believe, is mostly as a result of seasonality involved with the business (authority payments generally tend to be slow in Q1). Gross debt-to-equity at the end of the quarter stood at 0.22x (up marginally from 0.21x from a quarter ago). Valuation at the CMP of Rs339 per share, the stock is trading at PER of 10.3x/8.7x on FY23e/FY24e EPS. We will be revising our estimates and rating post the earnings call.