Result Update

June 3, 2013
Rating matrix
Rating Target Target Period Potential Upside : : : : Hold | 30 12-15 months 4%

Unity Infraprojects (UNIINF)

WHATS CHANGED
FY15E 2394.7 318.0 102.9

| 29

PRICE TARGET ........................................................................... Changed from | 56 to | 30

Key Financials
| crore Net sales EBITDA Adj. Net profit FY12 1972.8 271.8 103.6 FY13E 2039.8 273.6 92.6 FY14E 2123.8 283.7 83.2

EPS (FY14E) ......................................................................... Changed from | 13.3 to | 11.2 EPS (FY15E) ..........................................................................................Introduced at | 13.9 RATING ....................................................................................... Changed from Buy to Hold

Stretched working capital to restrict growth

Unity Infraprojects (Unity) Q4FY13 results were impacted by sluggish execution and dismal margins. While the topline at | 692.4 crore was lower than our estimate of | 755.1 crore due to client side delays, margins at 10.5% were lowest in the last 28 quarters due to escalation provisioning of | 10.5 crore, the revenue of which could flow in Q1FY14. The order book stood at | 3,838 crore, 1.9x order book to bill ratio (on a TTM basis). At the current order book, we remain cautious on its revenue growth in FY14 amid the managements optimistic guidance of 10% topline growth considering that ~25% of order book constitutes EPC order from three BOT projects, which are yet to commence construction. Topline, margins disappoint Unity reported a topline at | 692.4 crore (decline of 3.5% YoY), and lower than our estimate of | 755.1 crore. EBITDA margins at 10.5% (12.5% in Q4FY12) were way below our estimates of 12.7% due to escalation provisioning of | 10.5 crore, the revenue of which could flow in Q1FY14. The reported PAT at | 29.8 crore was lower than our estimate of | 33.1 crore given the revenues and margin disappointment. The effective tax rate at 14.2% was, however, lower restricting the dip in bottomline. Execution on BOT projects yet to be seen. Unitys order book stood at | 3,838 crore, 1.9x order book to bill ratio (on a TTM basis). The order inflow in FY14 would hold key for the companys topline growth in the next couple of years. We highlight that ~25% of order book constitutes EPC order from three BOT projects. We believe FC and subsequent execution on these projects would hold key for topline growth, going ahead. At the current order book, we remain cautious on its topline growth in FY14 and, hence, build in flattish revenue growth. Execution pick-up hinges on working capital improvement and inflows We remain wary of Unitys topline growth in FY14 on the current order book as ~25% of order book constitutes EPC order from three BOT projects, which are yet to commence construction. We highlight that traction in order inflow, FC and subsequent execution on BOT projects would hold the key for topline growth, going ahead. Furthermore, improvement in working capital is also warranted to shove up execution pace. We, therefore, assign a HOLD recommendation with a target of | 30/share despite its attractive valuation (2.6x FY14 P/E and 0.2x FY14 P/BV) and superior return ratios than its peers.
Exhibit 1: Financial Performance
| crore Net sales EBITDA EBITDA Margin (%) Depreciation Interest PAT Q4FY13 692.4 73.0 10.5 6.0 39.9 29.8 Q4FY13E 755.1 96.1 12.7 8.6 43.2 33.1 Q4FY12 717.5 89.4 12.5 5.6 34.5 38.7 Q3FY13 551.1 76.5 13.9 5.5 42.5 28.1 YoY Gr (%) -3.5 -18.3 -191 bps 7.9 15.5 -23.0 QoQ Gr (%) 25.6 -4.5 -333 bps 9.8 -6.2 6.2

Valuation summary
EPS (|) PE(x) Target PE(x) EV/EBITDA(x) P/BV(x) RoNW(%) RoCE(%) FY12 14.0 2.1 2.1 3.3 0.3 14.8 17.3 FY13E 12.5 2.3 2.4 4.0 0.3 11.7 15.8 FY14E 11.2 2.6 2.6 4.0 0.2 9.5 14.9 FY15E 13.9 2.1 2.1 3.8 0.2 10.6 15.4

Stock data
Mcap Debt Cash EV 52 week H/L Equity cap Face Value DII Holding (%) FII Holding (%) | 217 crore | 997 crore | 112 crore | 1102 crore 53/26 | 15 crore | 2.0 6.4 1.7

Price movement
6,300 80 60 40 3,700 20 0 Sep-12 Dec-12 Mar-13 Nifty (L.H.S) May-13 Price (R.H.S)

5,000

2,400 Jun-12

Analysts name
Deepak Purswani, CFA deepak.purswani@icicisecurities.com Bhupendra Tiwary bhupendra.tiwary@icicisecurities.com

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Execution sluggishness shadows Q4FY13 performance Unity reported a topline of | 692.4 crore (decline of 3.5% YoY) and lower than our estimate of | 755.1 crore implying a slower-thanexpected execution during the quarter
Exhibit 2: Vertical wise break up of Revenues
Irrigation & Water supply 12% Civil 69%

Transportation 19%

Source: Company, ICICIdirect.com Research

EBITDA margins at 10.5% (12.5% in Q4FY12), however, were way below our estimates of 12.7%. This is the lowest quarterly margin in the last 28 quarters The reported PAT at | 29.8 crore was lower than our estimate of | 33.1 crore given the revenues and margin disappointment. The effective tax rate at 14.2% was, however, lower, restricting the dip in bottomline

The reported PAT at | 29.8 crore was lower than our estimate of | 33.1 crore given the revenue and margin disappointment. The effective tax rate at 14.2% was, however, lower restricting the dip in bottomline

Order book at | 3838 crore, book to bill ratio of 1.9x Unitys order book stood at | 3,838 crore, 1.9x order book to bill ratio (on a TTM basis). The order inflow in FY14 would hold the key for the topline growth for the next couple of years. Additionally, ramp up on execution of BOT projects, which are yet to commence construction, would also have to be keenly watched.
Exhibit 3: Trend in order book
4200 4200 2.2 2.1 2.1 2.0 2.0 1.9 1.9 1.8 1.8

4180

4094

| cr

2700 2200 Q4FY12 Q1FY13 Orderbook (LHS) Q2FY13 Q3FY13 Q4FY13

Orderbook to bill ratio (RHS)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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(x)

The order book stood at | 3838 crore, implying 1.9x order book to bi1l ratio

3200

3838

3700

4045.1

Exhibit 4: Segment wise break up of order book

100 80 (%) 60 40 20 0 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 49 48 48 48 51 28 23 29 23 29 23 31 21 28 21

Civil construction contracts account for ~51% of the total order book

Civil
Source: Company, ICICIdirect.com Research

Irrigation & Water supply

Transportation

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Valuations
We assign a HOLD recommendation to the stock with a target price of | 30/share (at 4x FY14 EV/EBITDA)

We remain wary of Unitys topline growth in FY14 on the current order book as ~25% of order book constitutes EPC order from three BOT projects, which are yet to commence construction. We highlight that traction in order inflow, FC and subsequent execution on BOT projects would hold the key for topline growth, going ahead. Furthermore, an improvement in working capital is also warranted to shove up the execution pace. We, therefore, assign a HOLD recommendation despite its attractive valuation (2.6x FY14 P/E) and superior return ratios than its peers. We have valued the stock at | 30/share (4x FY14 EV/EBITDA, ~33% discount to leading construction companies).
Exhibit 5: Key Assumptions
| crore Order inflow Average execution (%) FY13 1678 50.8 FY14E 2500 52.8 FY15E 2800 54.2

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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Financial summary
Profit and loss statement
(| Crore) Sales Growth (%) Op.Expenditure EBITDA Growth (%) Other income Share of income in JV Depreciation EBIT Interest PBT Tax Extraordinary item Rep. PAT before MI MI Rep. PAT after MI Adjustment Adj. Net Profit Growth (%) EPS (|) FY12 1,972.8 15.9 1,700.9 271.8 19.7 17.2 2.8 20.1 271.8 121.3 150.5 46.9 0.0 103.6 0.0 103.6 0.0 103.6 9.8 14.0 FY13E 2,039.8 3.4 1,766.2 273.6 0.7 17.9 5.6 21.9 275.3 152.8 122.5 30.0 0.0 92.6 0.0 92.6 0.0 92.6 -10.6 12.5 FY14E 2,123.8 4.1 1,840.1 283.7 3.7 18.8 6.1 24.9 283.8 159.0 124.8 41.5 0.0 83.2 0.0 83.2 0.0 83.2 -10.1 11.2 FY15E 2,394.7 12.8 2,076.7 318.0 12.1 19.8 6.8 29.3 315.2 160.9 154.3 51.4 0.0 102.9 0.0 102.9 0.0 102.9 23.7 13.9

Cash flow statement

(| Crore) Net Profit before tax Depreciation Interest expenses Others Direct tax paid CF before change in WC Inc/Dec in Trade Recv. Inc/Dec in Inventories Inc/Dec in Loans & Adv Inc/Dec in cur liabilities CF from operations Purchase of Fixed Assets (Inc)/Dec in investments CF from investing Inc/(Dec) in Debt Inc/(Dec) in Net worth CF from Financing Net Inc/Dec in cash & eq. Opening cash balance Closing cash balance FY12 150.5 20.1 121.3 -17.2 -50.0 224.6 54.1 -121.7 -222.0 127.0 62.1 -19.3 25.2 5.9 -63.9 -8.6 -72.6 -4.5 222.4 217.8 FY13E 122.5 21.9 152.8 -16.0 -30.0 251.2 -137.6 -340.1 29.1 170.1 -27.3 -23.5 7.9 -15.6 -61.0 -1.7 -62.8 -105.7 217.8 112.2 FY14E 124.8 24.9 159.0 -18.8 -41.5 248.3 -29.8 -22.2 -40.0 -15.0 141.3 -30.0 18.8 -11.2 -109.0 -1.5 -110.6 19.6 112.2 131.7 FY15E 154.3 29.3 160.9 -19.8 -51.4 273.4 -42.0 -71.7 -111.3 82.6 131.0 -50.0 19.8 -30.2 -110.9 -1.9 -112.9 -12.1 131.7 119.6

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(| Crore) Liabilities Equity capital Reserves & Surplus Shareholder's fund Minority Interest Secured & unsecured loan Deferred Tax Liablity Sources of funds Assets Gross Block less: Acc. Depreciation Net Block Capital WIP Net Fixed Assets Investment Inventories Trade Receivables Cash Loans & Advances Total current assets Current Liab. & Prov. Net Current Asset Misc Expenditure Application of funds FY12 14.8 731.0 745.8 0.0 905.5 -1.8 1,649.5 222.2 90.3 131.8 0.0 131.8 54.3 199.8 676.3 217.9 862.0 1955.9 492.5 1463.4 0.0 1,649.5 FY13E 14.8 821.8 836.7 0.0 997.2 -0.3 1,833.6 246.8 113.7 133.2 0.0 133.2 64.3 539.9 813.9 112.2 832.8 2298.8 662.6 1636.2 0.0 1,833.6 FY14E 14.8 903.5 918.3 0.0 1,047.2 -0.3 1,965.2 276.8 138.5 138.3 0.0 138.3 64.3 562.1 843.7 131.7 872.8 2410.3 647.6 1762.7 0.0 1,965.2 FY15E 14.8 1,004.5 1,019.3 0.0 1,097.2 -0.3 2,116.2 326.8 167.9 159.0 0.0 159.0 64.3 633.8 885.7 119.6 984.1 2623.3 730.3 1893.0 0.0 2,116.2

Key ratios
FY12 Per share data (|) EPS Cash EPS BV Revenue per share Cash Per Share Operating Ratios (%) EBITDA Margin PBT / Net Sales PAT Margin Working Capital (ex cash) days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Div Yield (%) Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio 14.0 16.7 100.7 266.3 29.4 13.8 7.6 5.2 230 130 79 14.8 17.3 17.4 2.1 3.3 0.5 3.4 0.3 2.5 0.9 4.0 3.5 FY13E 12.5 15.4 112.9 275.3 15.1 13.4 6.0 4.5 273 133 103 11.7 15.8 16.6 2.3 4.0 0.5 0.7 0.3 3.2 1.1 3.5 3.3 FY14E 11.2 14.6 124.0 286.7 17.8 13.4 5.9 3.9 280 142 113 9.5 14.9 16.0 2.6 4.0 0.5 0.6 0.2 3.2 1.0 3.7 3.5 FY15E 13.9 17.9 137.6 323.2 16.1 13.3 6.4 4.3 270 132 105 10.6 15.4 17.2 2.1 3.8 0.5 0.8 0.2 3.1 1.0 3.6 3.4

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

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Company Description
Incorporated in 1979 and headquartered in Mumbai, Unity Infraprojects is mainly engaged in construction and allied activities. The company operates in four verticals: buildings and housing; transportation; water supply and irrigation. The company has grown from an EPC contractor to a full fledged infrastructure company in the transportation segment and currently has two BOT projects under development. As on Q43FY13, the order book was at | 3,838 crore, implying 1.9x order book to bill ratio (on a TTM basis).
Exhibit 6: Recommendation History
100 80 60 40 20 0 Jun-12 Jul-12 Sep-12 Oct-12 Price Dec-12 Jan-13 Mar-13 Apr-13 May-13

Target Price

Source: Reuters, ICICIdirect.com Research

Exhibit 7: Recent Releases

Date 1-Jun-12 17-Aug-12 8-Oct-12 9-Nov-12 14-Feb-13 Event Q4FY12 Result Update Q1FY13 Result Update Q2FY13 Result Preview Q2FY13 Result Update Q3FY13 Result Update CMP 40 45 49 43 37 Target Price 64 64 64 56 56 Rating Buy Buy Buy Buy Buy

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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ICICIdirect.com coverage universe (Construction)

Sector / Company HCC (HINCON) IVRCL (IVRINF) NCC (NAGCON) Simplex Infra (SIMCON) Supreme Infra (SUPINF) Unity Infra (UNIINF) CMP M Cap (|) TP(|) Rating (| Cr) 13 12 Sell 804 18 26 Sell 539 31 38 Buy 803 103 136 Buy 509 207 254 Buy 347 29 30 Hold 217 EPS (|) P/E (x) EV/EBITDA (x) P/B (x) RoE (%) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E -1.9 -2.5 -1.8 NA NA NA 12.0 13.6 12.1 0.8 0.9 1.0 -15.7 -9.0 -9.4 0.6 -4.5 0.6 48.1 NA 44.1 6.6 16.7 7.6 0.4 0.4 0.4 0.6 -8.6 0.9 1.4 2.4 2.4 2.9 1.7 1.7 7.6 7.5 6.5 0.4 0.4 0.3 1.5 2.6 2.5 24.8 18.0 11.3 4.1 5.7 9.1 4.4 4.9 5.8 0.5 0.4 0.4 12.0 7.8 4.8 54.8 65.5 70.7 3.1 2.6 2.4 4.2 3.9 3.6 0.9 0.7 0.6 24.7 23.0 20.0 12.7 14.0 12.5 2.3 2.1 2.3 3.7 3.3 4.0 0.3 0.3 0.3 15.5 14.8 11.7

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey

Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com

pankaj.pandey@icicisecurities.com

ANALYST CERTIFICATION
We /I, Deepak Purswani CFA, PGDM (FINANCE) Bhupendra Tiwary MBA (FINANCE) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

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