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C&C Constructions Limited, incorporated in 1996 has executed a number of infrastructure projects independently and through Joint Ventures. C&C takes pride in its success history and in its ability to execute large, diverse projects with varying degrees of complexity across a broad span of geographies. C&C's Project expertise lies primarily in transportation engineering projects including roads, bridges, flyovers and airport runways.

C&C CONSTRUCTIONS: Surge in FY11 order intake; Likely earnings recovery in FY12

Order book as at Mar-2011 stands at Rs.40b (up 70% YoY, 35% QoQ), led by robust intake of Rs.13b in 3QFY11. 

Order book is contributed by the following segments: Transport (Rs.28b), Buildings (Rs.6b), Railways (Rs.4b), Transmission (Rs.1b) and Water & sewage (Rs.2b). 

C&C has submitted tenders worth Rs.170-180b of work contracts, including tenders submitted by JV’s. The company is favorably placed in orders worth Rs.70-80b, which are expected to be awarded in the next 2-3 months. 

C&C reported 9MFY11 PAT of Rs.256m (down 30% YoY); PAT margin declined 143bp YoY to 3.3% from 4.7% in 9MFY10. 

C&C expects to report FY12 revenue of Rs.18b, up 43% YoY, on the back of strong order intake in FY11. PAT is expected at Rs.950m, up 38% YoY. 

C&C’s debt stands at Rs.9.1b as on 31 March 2011, which is likely to go up to Rs.13b by FY12, given the growing BOT portfolio and working capital requirement. 

FY11 net working capital (ex cash and advances to subsidiaries) is expected to reach 78% of total revenue from 57% in FY10. 

After a drop in FY11 earnings, we expect C&C’s FY12 performance to improve on the back of strong order book and better execution on slow-moving projects (like Mohali ISBT). However, to grow at 40-45% with net margins of >than 5%, C&C will have to sharply improve its working capital cycle. Stock is trading at 4x FY11E earnings.