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Sanghvi Movers: Splendid performance - Views on News from Equitymaster
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Sanghvi Movers: Splendid performance
Jun 5, 2009

Performance summary
  • Topline grows by 41% YoY during FY09, largely aided by acquisition and deployment of new cranes.
  • Operating margins expands by 3.5% to 76.4% on account of lower operating costs due to lower freight and fuel costs during the fiscal.
  • Net profit margins decline slightly from 28.9% in FY08 to 28.5% in FY09 mainly due to higher interest costs.
  • Bottomline grows by 8% YoY in 4QFY09 on the back of 19% YoY growth in the topline.
  • Recommends a dividend of Rs 2 per share for FY09 (dividend yield of 1.1%).


Financial Snapshot
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Net sales 792 940 18.6% 2,517 3,547 40.9%
Expenditure 239 189 -21.3% 682 835 22.5%
Operating profit (EBDITA) 553 752 35.9% 1,835 2,711 47.7%
EBDITA margin (%) 69.8% 79.9%   72.9% 76.4%  
Other income 19 6 -67.8% 52 68 30.3%
Interest (net) 83 145   307 530 72.6%
Depreciation 133 189 41.7% 475 680 43.2%
Profit before tax 355 424 19.3% 1,106 1,570 42.0%
Tax 118 168 42.1% 378 559 47.8%
Profit after tax/(loss) 237 256 8.0% 727 1,011 38.9%
Net profit margin (%) 29.9% 27.2%   28.9% 28.5%  
No. of shares (m)         43.6  
Diluted earnings per share (Rs)*         23.2  
Price to earnings ratio (x)**         7.8  
(* annualised, ** on trailing twelve months earnings)

What has driven performance in FY09?
  • Being the largest crane hiring company in the country, Sanghvi Movers (SML) continued to capitalise on the growth opportunities in the renewable energy, oil and gas and power sectors, despite the broader slowdown in infrastructure investments. The companyís total capex for FY09 stood at around Rs 2,340 m wherein it purchased 46 cranes. While we had estimated total 329 cranes by the end of FY09, SML closed the year with 324 cranes.

    The rate of utilization of the cranes stood between 85% and 87% during FY09 and the company believes that it may go down to around 81%-82% in FY10. Having said that, the blended realisation per crane was 3.5%, higher than our estimate due to the larger proportion of high capacity cranes. The operating margins expanded by 3.5% to 76.4% in FY09, which is higher than our estimate of 71.6%. As per the management, the operating margins are likely to be at around 73% to 75% in FY10.

    Particulars of crane
      FY09 % of total
    Total number of cranes 324  
    Cranes above 100 Tonnes 186 57.4%
    Cranes below 100 Tonnes 138 42.6%
         
    Brand new cranes 57 17.6%
    Old cranes 267 82.4%

  • In FY09, 35% of SMLís revenue came from the power sector and this is expected to go up to 45% in the next fiscal and to around 60% by FY12. With large scale capacity addition planned for the Eleventh Five Year Plan, the company sees several large projects coming its way. Refinery and gas sector accounted for around 11% of the total revenues in FY09 and the company expects the demand from this sector to remain robust, thus thereby increasing its share in coming fiscals.

  • SMLís receivable days went up from 93 days in FY08 to 111 days in FY09. However, the company expects to bring it down to around 100 days or lower in FY10.

  • SML has planned a capex of around Rs 1.2 bn for FY10. While the company earlier had placed an order of total 21 cranes, order of 3 cranes has been cancelled. Out of the 18 cranes, delivery of 2 cranes of 1,400 tonne and 750 tonne is scheduled in October 2009 and 2 cranes of 250 tonne in the later part of the fiscal. Delivery of remaining 14 cranes is likely to be postponed to FY11 or may even be cancelled depending upon the demand in certain sectors.

  • The company has plans to setup two depots at Satara in Maharashtra and near Jodhpur in Rajasthan in order to efficiently and timely serve its customers. The land for the same has been acquired.
  • SML had outstanding debt to the tune of Rs 5 bn and a debt to equity ratio of 1.3:1. The repayment of debt of Rs 1.6 bn is scheduled in FY10. Its borrowing cost has come down from 12.5% in FY08 to 10.9% per annum in FY09.

    In the result conference call, the management mentioned that the company plans to become debt free by FY12. It projected the growth of revenues to be around -10% to 10% in FY10, while the bottomline to be around -5% to 10% as compared to FY09.

What to expect?
At the current price of Rs 181, the stock is trading at a multiple of 6.1 times our estimated FY11 earnings. The topline and bottomline numbers of the company in FY09 have surpassed our estimates by 10% and 16% respectively. Further, although we had estimated lower operating margins after factoring in lower capacity utilisation, the same is expected to remain in the range of 73% to 75% over the next three years. The companyís purchase of technologically superior high-tonnage cranes and trailers and a wider presence offering proximity to large project sites are expected to strengthen its standing in the domestic market. We retain our positive view on the stock.

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