LancoInfratech

February13,2013

Powerrevenuestable,EPCcontinuestodrag:Power segment sales in Q3FY13

were up by 14% and generation volumes rose by 30% QoQ. As internal project
continues to be slow, EPC revenues were down by 28% QoQ and 70.3% YoY.
Revenues from resources were up by 17% QoQ and 24% YoY, mainly driven by a
15% YoY sales volume growth. Solar segment revenues were down by 75% YoY.
Overall sales for Q3FY13 were up by 15.2% YoY.

Volume analysis: Kondapalli project reported a decline of 18.4% in volumes

QoQ on account of lower gas availability. Amarkantak also reported 2.4% rise in
volumes QoQ as last quarter, the plants were shut partially on account of
maintenance and in this quarter, Unit 1 was shut due to tube leakage. Udupi
reported growth in generation by 49% QoQ on account of full commissioning
effect of 1200MWs and higher PLFs. Anpara, which was a main drag in Q2FY13,
saw an increase in volumes by 82% QoQ as the PLFs improved to 52%. Budhils
volumes suffered, as seasonally, its a weak period for Hydro power projects.
Trading volumes were up by 48% YoY and down by 13% QoQ. Griffin production
was up by 14% YoY and 10% QoQ at 0.8mt.

EBITDA takes a hit again: Consolidated Power EBITDA margins adjusted for
forex went down by 200bps QoQ, at 31% margins, mainly on account of lower
tariffs and higher cost. Though the revenues declined, EPC margins improved by
500bps YoY and 400bps QoQ, mainly as some projects got completed.

Capitalisation of plants and soaring debt magnify Power sector losses: For
Q3FY13, after adjusting forex losses, net loss stood at Rs3.6bn (Q2FY12 loss was
at Rs2.7bn) on account of lower margins, capitalisation and soaring interest
charges.
Contd2

Rupa Shah
rupashah@plindia.com
+91-22-66322244

Rating
Price
Target Price
Implied Upside
Sensex
Nifty

Accumulate
Rs12
Rs14
16.7%
19,608
5,933

(PricesasonFebruary13,2013)
Tradingdata
Market Cap. (Rs bn)
Shares o/s (m)
3M Avg. Daily value (Rs m)
Majorshareholders
Promoters
Foreign
Domestic Inst.
Public & Other
StockPerformance
(%)
1M
6M
Absolute
(15.7)
(8.5)
Relative
(15.4)
(19.7)
HowwedifferfromConsensus
EPS(Rs)
PL
Cons.
2014
-2.0
1.0
2015
0.6
1.1

28.2
2,389.7
324.5
70.83%
2.94%
2.22%
24.01%
12M
(26.9)
(37.3)
%Diff.
NA
45.2

PricePerformance(RIC:LAIN.BO,BB:LANCIIN)
(Rs)
25
20
15
10
5

Source:Bloomberg

Feb-13

Dec-12

Oct-12

Aug-12

Jun-12

Apr-12

Feb-12

Keyfinancials(Y/eMarch)
Revenues (Rs m)
Growth(%)
EBITDA (Rs m)
PAT (Rs m)
EPS (Rs)
Growth(%)
Net DPS (Rs)
Profitability&Valuation
EBITDAmargin(%)
RoE(%)
RoCE(%)
EV / sales (x)
EV / EBITDA (x)
PE (x)
P / BV (x)
Netdividendyield(%)

2012
101,194
27.3
17,899
(1,120)
(0.5)
(126.2)

2013E
137,763
36.1
23,890
(11,961)
(5.0)
967.9

2014E
164,502
19.4
31,162
(4,817)
(2.0)
(59.7)

2015E
184,344
12.1
34,858
1,402
0.6
(129.1)

2012
17.7
(2.4)
2.7
3.2
18.1
(25.2)
0.6

2013E
17.3
(29.1)
1.1
3.1
17.9
(2.4)
0.8

2014E
18.9
(14.6)
2.4
2.5
13.2
(5.9)
0.9

2015E
18.9
4.5
3.7
1.9
10.0
20.1
0.9

Source:CompanyData;PLResearch

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that
the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.
Please refer to important disclosures and disclaimers at the end of the report

Q3FY13ResultUpdate

Lowerrealisationsovershadowvolumegrowth

Lanco Infratech

Exhibit1:

Valuation: At CMP, the stock is trading at 0.9x FY15E P/BV which is factoring in
higher losses in existing assets. However, gradual tariff revision and
improvement in operational performance may trigger some medium-term gains.
We have revised our TP downwards taking into account higher debt burden and
slower execution on EPC front. Moreover, the stock has corrected by 15% over
the last quarter, with no major negative connotation from business point of
view. Thus, we upgrade the stock from ReducetoAccumulate.

Q3FY13ResultOverview(Rsm)

Y/eMarch

Q3FY13

Q3FY12

YoYgr.(%)

Q2FY13

9MFY13

9MFY12

YoYgr.(%)

Salesposteliminationonintersegrev

34,887

30,293

15.2

31,848

101,692

67,928

49.7

18,187

16,849

7.9

14,714

51,612

35,335

46.1

45.5

55.9

36.8

33.0

24.8

(1,341)

(701)

(1,056)

(3,281)

(5,985)

Expenditure
Consumption of Raw Materials, Generation Exps

%ofNetSales

Increase/Decrease in WIP

(3.4)

(2.3)

Purchase of Trading Power

%ofNetSales

6,441

3,098

16.1

10.3

1,550

1,988

3.9

6.6

3,443

2,203

%ofNetSales

Personnel Cost

%ofNetSales

Construction, Transport, Mining Expenses

(2.6)

(2.1)

(4.2)

7,267

19,151

8,359

18.2

12.3

5.9

1,670

5,078

5,411

4.2

3.2

3.8

56.3

3,093

9,583

7,642

9.7

9.4

11.2

13.6

946

2,811

2,538

2.4

1.8

2.7

107.9
(22.1)

129.1
(6.2)
25.4

%ofNetSales

9.9

7.3

Other Expenditure

939

827

2.3

2.7

Total Expenditure

29,218

24,263

20.4

26,633

84,952

53,301

59.4

EBITDA

5,669

6,030

(6.0)

5,214

16,740

14,627

14.4

16.2

19.9

16.4

16.5

21.5

%ofNetSales

Margin(%)

10.7

Depreciation

3,051

1,501

103.2

2,799

8,404

4,009

109.6

EBIT

2,618

4,529

(42.2)

2,416

8,337

10,618

(21.5)

Interest

6,737

2,682

151.1

5,267

17,393

7,499

131.9

Other Income
Forex Loss/Gain
Add: elimination profits
Exceptional
PBT
Tax

TaxRate(%)

RecurringPat
Minority Interests & Eliminations

377

244

54.9

246

945

759

24.4

(429)

(259)

NA

2,123

(608)

(2,317)

NA

189

1,754

(89.2)

(122)

517

6,507

(92.0)

483

(3,982)

3,585

NA

(604)

(8,202)

8,552

NA

573

533.9

7.2

626

1,417

2,027

(30.1)

(103.6)

(17.3)

23.7

NA

(1,230)

(9,619)

6,524

(129)

(798)

(8,378)

(14.4)

14.9

(4,554)

3,051

(92)

(2,442)

NA

PATAMIPostElimination

(4,646)

609

NA

(1,359)

(10,417)

(1,854)

NA

Adj.PAT

(3,645)

789.0

NA

(2,781)

(8,537)

NA

Source:CompanyData,PLResearch

February 13, 2013

Lanco Infratech

Exhibit2:

SegmentalBreakup(Rsm)

Y/eMarch
Revenues
Power
Construction
Real Estate
Resources
Unallocated
Total
Less: Inter-segmental Revenues

Q3FY13

Q3FY12

YoYgr.(%)

Q2FY13

9MFY13

9MFY12

YoYgr.(%)

25,337

13,011

94.7

22,256

68,898

33,631

104.9

9,284

31,231

(70.3)

12,996

39,062

69,839

(44.1)

530

201

164.2

347

948

723

31.2

2,053

1,598

28.4

1,658

5,426

4,830

12.4

209

136

53.6

199

606

378

60.5

37,413

46,177

(19.0)

37,455

114,940

109,399

5.1

2,273

15,669

(85.5)

5,393

12,692

40,872

(68.9)

35,140

30,508

15.2

32,063

102,247

68,527

49.2

Power

3,627

1,821

99.2

3,523

8,879

6,748

31.6

14.3

14.0

15.8

12.9

20.1

Construction

699

3,893

1,768

3,505

10,713

7.5

12.5

13.6

9.0

15.3

NetRevenues
EBIT
Margin(%)
Margin(%)

Real Estate

(3)

1.8

(1.6)

Resources

(1,404)

548

(68.4)

34.3

(300)

(19)

(143.3)

(13.9)

2,631

6,239

7.5

20.5

189

1,757

2,442

4,483

Margin(%)
Margin(%)

Unallocated

Margin(%)

Total

Margin(%)

Less: Inter-segmental Profit

Total

(82.1)
NA

(67.3)

(16)

0.3

(1.7)

(775)

(3,445)

(1,395)

(46.7)

(63.5)

(28.9)

113

(122)

(170)

56.7

(20.1)

(45.0)

4,631

8,800

15,896

14.4

8.6

23.2

(89.3)

(122)

517

6,510

(92.1)

(45.5)

4,753

8,282

9,387

(11.8)

NA
NA
(57.8)

NA
NA
(44.6)

Source:CompanyData,PLResearch

February 13, 2013

Lanco Infratech
IncomeStatement(Rsm)
Y/eMarch
2012
NetRevenue
Raw Material Expenses
Gross Profit
Employee Cost
Other Expenses
EBITDA
Depr. & Amortization
Net Interest
Other Income
ProfitbeforeTax
Total Tax
ProfitafterTax
Ex-Od items / Min. Int.
Adj.PAT
Avg.SharesO/S(m)
EPS(Rs.)

101,194
71,532
29,662

11,763
17,899
5,628
10,539
(3,666)
(1,933)
2,246
(4,180)
(5,982)
(1,120)
2,389.7
(0.5)

CashFlowAbstract(Rsm)
Y/eMarch
C/F from Operations
C/F from Investing
C/F from Financing
Inc. / Dec. in Cash
Opening Cash
Closing Cash
FCFF
FCFE

KeyFinancialMetrics
Y/eMarch
Growth
Revenue (%)
EBITDA (%)
PAT (%)
EPS (%)

164,502
120,928
43,574

12,412
31,162
13,512
22,412
1,012
(3,750)
841
(4,591)
425
(4,817)
2,389.7
(2.0)

184,344
135,745
48,599

13,741
34,858
14,741
19,452
508
1,173
537
636
500
1,402
2,389.7
0.6

2015E

32,066
(155,894)
124,424
596
12,905
13,500
(80,506)
62,027

24,110
(103,446)
81,269
1,933
13,500
15,433
(88,166)
18,527

17,166
20,212
(47,398)
(10,021)
15,433
5,412
(30,603)
(57,240)

36,380
42,803
(77,183)
1,999
5,412
7,411
(9,646)
(69,716)

2012

2013E

2014E

2015E

27.3
(12.9)
(126.2)
(126.2)

36.1
33.5
967.9
967.9

19.4
30.4
(59.7)
(59.7)

12.1
11.9
(129.1)
(129.1)

18.9
(2.9)
2.4
(14.6)

18.9
0.8
3.7
4.5

12.5
(44)

10.0
(33)

(5.9)
0.9
13.2
2.5

20.1
0.9
10.0
1.9

(22.4)
(27.0)
4.2
1,188.3

22.0
63.2
4.3
(4,971.0)

17.7
(1.1)
2.7
(2.4)

17.3
(8.7)
1.1
(29.1)

6.3
(192)

11.4
(69)

(25.2)
0.6
18.1
3.2

EarningsQuality
Eff. Tax Rate
20.3
Other Inc / PBT
49.1
Eff. Depr. Rate (%)
2.7
FCFE / PAT
(5,538.1)
Source:CompanyData,PLResearch.

February 13, 2013

137,763
104,521
33,242

9,352
23,890
11,564
24,052
591
(11,135)
1,987
(13,122)
979
(11,961)
2,389.7
(5.0)

2014E

Valuation
PER (x)
P / B (x)
EV / EBITDA (x)
EV / Sales (x)

2015E

2013E

BalanceSheet
Net Debt : Equity
Net Wrkng Cap. (days)

2014E

2012

Profitability
EBITDA Margin (%)
PAT Margin (%)
RoCE (%)
RoE (%)

2013E

BalanceSheetAbstract(Rsm)
Y/eMarch
2012

2013E

2014E

2015E

47,061
309,050
16,415
372,526
308,657

27,643
36,225
14,121
120,847
98,742

372,525

35,099
415,743
18,775
469,618
398,809

28,952
41,857
15,433
126,509
100,085

469,618

30,804
389,106
18,914
438,824
361,898

29,241
47,685
5,412
160,213
117,940

438,824

32,206
329,036
18,916
380,158
300,444

29,241
50,473
7,411
190,028
146,966

380,158

QuarterlyFinancials(Rsm)
Y/eMarch
Q4FY12

Shareholder's Funds
Total Debt
Other Liabilities
TotalLiabilities
Net Fixed Assets
Goodwill
Investments
Net Current Assets
Cash&Equivalents
OtherCurrentAssets
CurrentLiabilities
Other Assets
TotalAssets

Q1FY13

Q2FY13

Q3FY13

33,762
3,767
11.2
1,619
3,040
1,650
2,513
219
728
728

34,958
5,857
16.8
2,554
5,389
(1,982)
(3,617)
218
(4,412)
(2,102)

31,848
5,214
16.4
2,799
5,267
2,123
(606)
626
(1,360)
(2,782)

34,887
5,669
16.2
3,051
6,737
377
(3,502)
573
(4,646)
(3,645)

2012

2013E

2014E

2015E

Project Dev. (Rs m)

99,236
Sale of Energy (Rs m)
46,126
Resources (Rs m)
6,903
Property Dev. (Rs m)
753
Roads (Rs m)

Int. Rate (%)

4
Capacity Add. (MWs)
682
Capex (Rs bn)
88
EBIDTA Marg. (%)
18
Debt (Rs bn)
280
Source:CompanyData,PLResearch.

50,297
90,452
10,395
2,063
2,688
6
2,344
83
17
416

55,327
103,392
12,579
2,761
2,854
6
1,980
23
19
389

49,794
118,456
13,668
5,521
2,854
6
250
25
19
329

NetRevenue
EBITDA
%ofrevenue
Depr. & Amortization
Net Interest
Other Income
ProfitbeforeTax
Total Tax
ProfitafterTax
Adj.PAT

KeyOperatingMetrics
Y/eMarch

(2.4)
0.8
17.9
3.1

(20.3)
(12.1)
3.9
(154.9)

Lanco Infratech

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India
Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
RatingDistributionofResearchCoverage

55.9%

60%
%ofTotalCoverage

50%
40%
30%
20%

24.6%
18.6%

10%

0.8%

0%
BUY

Accumulate

Reduce

PLsRecommendationNomenclature

Sell

BUY

Over 15% Outperformance to Sensex over 12-months

Accumulate

Outperformance to Sensex over 12-months

Reduce

Underperformance to Sensex over 12-months

Sell

Over 15% underperformance to Sensex over 12-months

TradingBuy

Over 10% absolute upside in 1-month

TradingSell

Over 10% absolute decline in 1-month

NotRated(NR)

No specific call on the stock

UnderReview(UR)

Rating likely to change shortly

This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. Ltd. Mumbai, India (PL) and is meant for use by the recipient only as
information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be
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or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accept any responsibility of whatsoever nature for the information,
statements and opinion given, made available or expressed herein or for any omission therein.
Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The
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February 13, 2013