Simplex Infrastructures (Simplex) reported in-line set of numbers for 2QFY2016.
The company reported a top-line of Rs1,392cr, up 11.5% yoy, but slightly below
our expectation of Rs1,399cr. The EBITDA for the quarter stood at Rs143cr, ahead
of our estimate of Rs141cr while the EBITDA margin expanded by 7bp yoy to
10.3%, for 2QFY2016. Stronger execution and almost in-line operating
performance helped Simplex report a PAT of Rs14cr. The reported PAT margin of
the company was almost flat on a yoy basis at 1.0% in 2QFY2016.
Simplex’s order book (including L1) as of 2QFY2016 stands at ~Rs18,321cr
(order book to LTM sales ratio stands at 3.1x).
Outlook and valuation: At the current market price of Rs319, the standalone EPC
business is trading at FY2016E and FY2017E P/E multiple of 20.3x and 10.1x,
respectively. (1) 10.6% top-line and 57.8% bottom-line CAGR during
FY2015-17E, (2) strong order book of Rs18,321cr (OB to LTM sales ratio of 3.1x),
and (3) scope for improvement in WC as % of sales ratio from 64% in FY2015 to
53% in FY2017E, should lead to improvement in D/E ratio from 2.2x in FY2015
to 1.8x in FY2017E. We have assigned a 1-year forward P/E multiple of 11.0x to
our FY2017E EPS estimates of Rs31/share, resulting in a value of Rs346 per share.
Given the limited upside in the stock from the current levels, we have a Neutral
rating on the stock.

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