Punj Lloyd – Cost Overrun – Q2 Review

Punj LLoyd reported Rs529mn PAT below estimates of Rs1.4bn on account of Rs1.0bn of losses in Simon Carves on cost overruns and project disputes on the Ensus bio-ethanol project in the UK. Sales growth was below expectations as despite Rs98bn of orders in Libya the company could not book any sales as the threshold of revenue recognition could not be reached. The company ended 2QFY10 with an order backlog of Rs268bn, up 24% YoY (Rs114bn inflows in 1HFY10).

SABIC project disputes cost Rs4.3bn in FY09. In August 09 ~1,000 workers stopped work over payment disputes between Simon Carves and sub-contractors. Post a small delay work began and Punj Lloyd is now negotiating claims/change in scope with Ensus.

Despite raising Rs6.7bn through a QIP placement in Aug09 and Rs6bn through NCDs the debt at Rs43.9bn (Rs35.5bn end FY09) remains high with cash of Rs5.7bn

Punj Lloyd is expected to report a fully diluted EPS of Rs12-13 and Rs15-17 for fy10 and fy11 respectively.

Anand Rathi expects Punj to report a fully diluted EPS of Rs12.2 and Rs16.7 for fy10 and fy11 respectively.

Consensus EPS estimate is Rs 12 and Rs 15.5 for fy10 and fy11.

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