engineering shares information Punj Lloyd

Punj Lloyd Ltd (updated - 09 Mar 2010)
UK-based Ensus has sought £23.1 million (around Rs 160 crore) as liquidation damages from Simon Carves, Punj Lloyd’s 100 per cent subsidiary, due to late completion of its bioethanol project. While the £160-million order was booked by Punj Lloyd after its acquisition of Simon Carves in 2006, the work on this project began in the first quarter of 2007-08. It was scheduled for completion by early 2009.

Religare Hichens Harrison’s analysts say, “From the outset, the project has been beset by delays, owing to low productivity from UK labourers and sub-contractors and adverse weather conditions. Though the timeline for completion was extended to December 2009, the company failed to comply with the same. It was finally completed in January 2010.” Punj Lloyd has blamed sub-contractors and plans to contest the claim.

The recent case of Punj Lloyd being asked for damages is nothing new. It has incurred cost overruns amounting to around Rs 300 crore on the project in the first nine months of 2009-10, suggest analysts. Post this liability, HSBC analysts expect Punj Lloyd to report a loss in 2009-10.

Growth in consolidated revenues has been decelerating since the last five quarters and profits have been far from impressive during the period (barring the June 2009 quarter). Going forward, analysts do not rule out the possibility of further write-offs from delays due to design changes in an ONGC order, Rs 9,850 crore worth of orders from Libya and the Rs 570-crore PTT contract. Since Libya accounted for 43 per cent of the order book (worth Rs 23,400 crore) at the end of December 2009, any delays in the projects could impact earnings, they said.

Punj Lloyd’s stock shed nearly 2 per cent post the announcement (on March 3) to Rs 178.35. It closed at Rs 185.25 yesterday, and currently trades at 14.8 times 2010-11 earnings according to consensus analysts’ estimates. While analysts are not positive on the stock, they say better execution and steady financial performance for the next few quarters will be the key triggers for re-rating the stock.
source - BS

Of late, the company has been beset by several problems related to liquidation damages on account of projects undertaken by its subsidiary. As on December 2009, PLL had total debt of about Rs 4,800 crore and a debt to equity ration of 1.45. For the nine-month period ended December 2009, the interest outgo rose 66 per cent to Rs 246.2 crore, as against a net profit of Rs 192 crore in the same period a year ago.

Going forward, analysts expect the debt-equity ratio to come down to 0.8-1 in FY11, helped by higher net worth and lower debt. However, there will not be much impact on interest outgo, considering that even if the company uses the entire money for paying debt, earnings will be revised by 5-7 per cent for FY11. PLL will use a part of this money to build cash reserves and improve its working capital cycle, which was almost 161 days in the third quarter of the current financial year.

Meanwhile, analysts expect the business environment to improve over the next two years due to flow of new orders and growing focus on infrastructure projects. The company is expected to post earnings per share of Rs 15.3 and 18.9 in FY11 and FY12, respectively. At Rs 175.5, PLL is trading 12 times FY11 and 10 times FY12 estimated earnings.
source - Business Standard

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Punj Lloyd Ltd (updated - 17 June 2010)
After being beaten down on bourses for months, the share price of Punj Lloyd gained 3.69 per cent on Wednesday, as the company announced bagging a Rs 1,394-crore order. Since the beginning of the year, the share price has retreated 39 per cent, as compared to a 17 per cent gain in the Sensex. Analysts attribute this to the delay in execution of orders and the pressure on operating profit margins (OPMs). OPM in the March quarter was at a negative 19 per cent; it has been dipping consistently after rising to 4.5 per cent in the same quarter a year ago. There have been losses at the project level also since the past five quarters.

Analysts at Nomura point that the working capital days have increased to 152 days at the end of FY10, as compared to 84 days at the end of FY09, as receivables and inventory rose, while current liabilities dipped. The industry standard for working capital turnover — the ability of the management to convert its working capital into revenues (faster the better) — is around 90 days. The increase in working capital days meant the company had to rely on longterm funds for its short-term requirements, due to which it saw a substantial increase in debt. Subsequently, the net debt-to-equity ratio increased to 1.27:1 at the end of FY10 from 1.11 in FY09. This is despite the increase in funds raised through a qualified institutional placement and the Pipavav stake sale.

At the end of March 2010, the book-to-bill ratio — a key operating matrix to judge the rise in order inflow — was at 2.63 times. It is low if compared to peers like L&T, who have a book-to-bill in excess of four to five times. The current order will spruce it up a bit, but don’t expect the order book to translate into revenues quickly, as it mainly comprises long-term projects.

While there is some positive sentiment at the moment, analysts look out for more clarity on project execution and cash generation.
source - business standard

Punj Lloyd Ltd (updated - 31 Mar 2010)
Punj Lloyd (PLL) has sold its 19.43 per cent stake in Pipavav Shipyard at Rs 50.75 a share (20 per cent discount to the market price), aggregating Rs 656.46 crore. It plans to focus on its core business in the hydrocarbon and infrastructure sector and will report an extraordinary profit of about Rs 300 crore on this investment that will be booked in the quarter ending March 2010.

It had invested in Pipavav Shipyard to gain a fabrication facility that would have helped it construct offshore platforms. PLL says it will continue to bid for projects with Pipavav where their interests converge.