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HSBC Overweight on HCC

May 7, 2007

HSBC in a report released jus ta while ago is overweight on Hindustan Construction Company. They have set a price Target of Rs 125.

HCC declared their full year number with sales growth of 19% to INR23.6bn (vs HSBC
estimate of INR24.3bn). The PBT was up 20% yoy, however, higher tax rate (additional
INR220mn due to removal of 80IA benefit) has resulted in decline in a profit to
INR793mn (vs HSBC estimates of INR857mn). The lower sales growth has been due to
the excessive snowfall and rain at some of its project sites resulting in project execution delay. The net profit growth was impacted by higher staff cost (up 59%), higher interest (50%), and depreciation cost (up 52%, capex of INR3.8bn)

HSBC has reduced FY08e and FY09e profit by 11% and 7% to INR1.18bn and INR1.56bn respectively. HSBC reduced FY08e sales by 4% to INR30.7bn, while increasing the sales of FY09e marginally. HCC’s EPS is expected to be around INR4.6 and INR6.1 for FY08e and FY09e.

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