For 1HFY2016, Sadbhav Infrastructure Project Ltd (SIPL) reported a consol.
top-line of Rs274cr (vs Rs500cr in FY2015). The Reported top-line (for 1HFY2016),
on a yoy basis benefitted from (1) 16.2% toll income growth across
Hyderabad-Yadagiri project, (2) 69.2% gross toll income growth across
Maharashtra Border Check Post project (as 4 new check posts commenced
operations in 2QFY2016; 18% toll hike seen during the quarter), and (3) 11.1%
toll income growth seen across the Ahmadabad Ring Road project.
The Reported EBITDA for 1HFY2016 stood at Rs180cr while the EBITDA margin for
the same period was at 65.7% (vs 61.7% for FY2015).
Higher interest expenses (Rs284cr for 1HFY2016 vs Rs526cr for FY2015) led to
losses for SIPL of Rs159cr for 1HFY2016.
Outlook and valuation: We expect SIPL to report a strong 44.3%/47.8%
revenue/EBITDA CAGR over FY2015-17E. Management expects SIPL’s entire BOT
portfolio (we model MBHPL to commission operations in FY2018E only) to be
operational by FY2017E only. Toll collection at its existing projects would further
ramp-up, going forward. Interest expenses accounted for 170% of the FY2015
consol. EBITDA. We expect this ratio to decline to ~95% by FY2017E.
PAT level losses since FY2013 have eroded overall net worth of consol. entity from
Rs971cr in FY2013 to `788cr in FY2015. Despite uptick in traffic numbers across
its road portfolio, there exists a possibility of the company continuing to report
losses for next few quarters, as it would be impacted by 3 new projects
commencing operations in next few months, as highlighted by the Management.
Our view that SIPL would continue to report losses stems from the point that peak
debt requirement of the company (assuming no projects are added/ acquired)
would be at Rs8,510cr by FY2017E. The incremental debt requirement would be
towards new projects and stake acquisition of DPTL and MBHPL projects.
SIPL, at consol. level, should report cash level profits from 4QFY2016E onwards.
We have valued SIPL using Sum-of-The-Parts method, where we have valued each
project using “Free Cashflow to Equityholders” method and adjusted standalone
entity’s FY2016E debt to arrive at a fair value of Rs100/share. Given the limited upside
potential from the current levels, we maintain our NEUTRAL rating on the stock.

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