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Punj Lloyd – Execution Delays Hit Bottomline

August 5, 2010

Punj Lloyd reported 1QFY11 PAT loss of Rs306mn, significantly below CIRA estimate of Rs439mn profit. PAT loss was driven by sharp
decline in revenues. 1QFY11 revenue at Rs16.1bn declined 46% YoY and was 36% below CIRA estimate of Rs25bn. Losses would have been higher but for Rs1.28bn (Rs201mn in 1QFY10) other operating income in the quarter.

~38% of order backlog comes from slow moving Libya orders. Continuing execution delays and operating leverage led to EBITDA margins falling to 0.4% in 1QFY11 from 9.7% in 1QFY10. According to management, Rs300MM of cost overruns were booked in the Ensus order and Rs250MM in the ONGC Heera order. This along with fixed overheads on slow moving orders resulted in Jun-q PAT (loss) of Rs306MM. Management had guided post FY10 analyst meet that they expected one-offs to persist in 1HFY11, but with much lower intensity.

Punj Lloyd continues to face execution delays, cost overruns in projects and auditor qualifications. 38% orders backlog consists of delayed Libyan orders where execution is slow.Another round of earnings downgrade by the street could be near-term overhang on stock price. What a change in the fundamentals of the company which was a Race Horse 3 years ago 🙂

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