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Institutional Equities
Operating margin under pressure
The company reported EBITDA margin in the range of 9-10% and EBITDA showed a CAGR of 31% over
FY06-11. We expect EBITDA margin to be under pressure due to rising contribution of low margin projects and
two projects where cost escalation can’t be passed on for two years. EBITDA margin is estimated to decline
by 50bps to 8.6% in FY12 and then improve by 20bps to 8.8% in FY13. EBITDA is expected to show a CAGR
of 13% to Rs 5.5bn in FY12 and Rs6.6bn in FY13, respectively. Net profit is expected to decline in FY12 by
14% due to lower operating margin and higher interest rates but grow by 32% in FY13.
Exhibit 19: EBITDA margin trend
Exhibit 20: EBITDA trend
(%)
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
FY13E
FY12E
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
Source: Company, Nirmal Bang Institutional Equities Research
Source: Company, Nirmal Bang Institutional Equities Research
Improvement in return ratios
During FY07-11, the company's return ratios were in declining mode due to equity dilution and withdrawal of
Section 80A tax benefit. We expect the RoE to decline by 150bps to 6.7% in FY12 due to fall in operating
margin and higher interest rates. In FY13, the RoE is likely to improve by 150bps to 8.1% based on 32%
growth expected in PAT and assumption of no equity dilution.
Exhibit 21: Return ratio trend
(%)
15
13
11
9
7
5
FY09 FY10 FY11 FY12E FY13E
ROCE (%) ROE (%)
Source: Company, Nirmal Bang Institutional Equities Research
88 IVRCL