BackExecution challenges lead to a soft Q1 for Sadbhav Engineering
Analysts at HDFC Securities Ltd said Sadbhav Engineering continued its weak operating performance in Q1 as revenue and Ebitda missed estimates by 34 and 52% respectively and the company reported a loss of ₹16.9 crore
PremiumSadbhav Engineering Ltd's performance for the quarter ended 30 June, though an improvement over the year-ago quarter, was on a much lower base. Notably the same also came lower than expectations.
Income from operations came at ₹262.83 crore versus ₹229.69 crore in the previous quarter. The Ebitda (earnings before interest, tax, depreciation, and amortization) margin at 9.19% also improved from 8.47% year-on-year. The net loss at ₹16.86 crore also came lower than ₹26.58 crore showing a reduction of 37% over the corresponding quarter.
Analysts at HDFC Securities Ltd said Sadbhav Engineering continued its weak operating performance in Q1 as revenue and Ebitda missed estimates by 34 and 52% respectively and the company reported a loss of ₹16.9 crore (versus the estimate of ₹10 crore profit).
Sadbhav Engineering reported lower-than-expected standalone operational performance for Q1FY22, led by weak execution said analysts at Sharekhan by BNP Paribas. Sadbhav continued to suffer from delays in receipt of appointed dates for three projects, including land acquisition delay in one of the projects they added. The standalone net loss, however, came lower than their expectations, helped by higher-than-expected other income.
The company, which has a decent order book, however, is facing challenges on execution. The standalone order book stood at ₹9,110 crore at the end of the June, which is more than five times FY21 revenues. While order book is healthy and provides confidence on revenue visibility, the company is facing challenges on executions.
It is facing multiple challenges on ramping up execution towards normalcy as it requires investment in working capital, said analysts at HDFC Securities Ltd. Asset monetization ( ₹1,400 crore), along with arbitration inflows ( ₹350 crore), is expected to yield ₹1,700 crore- ₹1,800 crore over the next 12 months, of which ₹800 crore- ₹900 crore will be utilized for working capital infusion and the balance towards deleveraging added HDFC Securities.
We believe the company’s balance sheet is on an improving trajectory, although the pace has been slower than expected said analysts at Sharekhan. They have kept FY22 estimates unchanged while have lowered their estimates for FY23.
The stock has corrected by more than 5% in two trading sessions post results.
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