1QFY2012 Result Update | Infrastructure

August 16, 2011

Punj Lloyd
Performance Highlights
Y/E March (` cr) Net sales Operating profit Net profit 1QFY12 2,263 180.9 (12.7) 1QFY11 1,734 134.1 (30.6) % chg (yoy) 30.5 34.9 4QFY11 2,326 208.0 18.5 % chg (qoq) (2.7) (13.0) -

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Infrastructure 1,863 1.7 142/53 1,343,090 2 16,731 5,036 PUJL.BO

`56 -

Source: Company, Angel Research

For 1QFY2012, Punj Lloyd (Punj) posted mixed set of numbers with decent top-line performance, stable margin but loss at the earnings level. The companys current order backlog stands at `23,938cr (3.0x FY2011 revenue). Further, the company has received orders worth `5,627cr during CY2011 against `9,978cr in FY2011. However, owing to uncertainty over receivable claims and overhangs on the stock because of lack of clarity on various issues (execution, margin and Libyan projects), we maintain our Neutral view on the stock. Mixed performance: For 1QFY2012, Punj posted 30.5% yoy top-line growth to `2,263cr (`1,734cr). Barring 4QFY2011, this is quite an impressive performance when compared to the last seven quarters. EBITDA margin for the quarter stood at 8.0% against 7.7% in 1QFY2011. Interest and depreciation cost came in at `113.3cr (`81.0cr) and `61.7cr (`64.0cr), respectively. Interest cost jumped by 39.9% yoy and 14.6% qoq. On the earnings front, Punj reported loss of `12.7cr compared to loss of `30.6cr in 1QFY2011 due to high interest cost and tax. Outlook and valuation: The infrastructure sector has been marred by concerns such as high interest cost, margin pressure due to high commodity prices and poor award activity across segments. On account of these concerns and continued disappointing performance since the last few quarters, the stock has demonstrated huge underperformance over the last 12 months on the bourses. We have valued Punj on 1x P/BV (FY2013) and have arrived at a fair value of `95. Although the stock offers an upside of 71.4% from the current levels, we continue to maintain our Neutral view on the stock due to the headwinds faced by the sector and overhangs (mentioned above) on Punj.

PUNJ@IN

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 37.2 20.1 12.3 30.5

Abs. (%) Sensex Punj Lloyd

3m (8.8)

1yr (7.3)

3yr 14.2 (79.4)

(8.2) (51.6)

Key financials (Consolidated)

Y/E March (` cr) Net sales % chg Adj. net profit % chg FDEPS (`) EBITDA margin (%) P/E (x) RoAE (%) RoACE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2010 10,448 (12.3) (363.2) 51.1 (10.9) 3.5 (13.2) 2.0 0.6 0.5 15.7

FY2011 7,850 (24.9) (178.6) (5.4) 5.2 (5.9) 1.8 0.6 0.7 12.6

FY2012E 9,585 22.1 82.5 2.5 8.3 22.6 2.7 6.4 0.6 0.6 7.4

FY2013E 10,992 14.7 134.0 62.3 4.0 8.4 13.9 4.3 7.2 0.6 0.6 7.0

Shailesh Kanani
022-39357800 Ext: 6829 shailesh.kanani@angelbroking.com

Nitin Arora
022-39357800 Ext: 6842 nitin.arora@angelbroking.com

Please refer to important disclosures at the end of this report

Punj Lloyd | 1QFY2012 Result Update

Exhibit 1: 1QFY2012 performance (Consolidated)

Y/E March (` cr) Net sales Total expenditure Operating profit OPM (%) Interest Depreciation Non operating income Nonrecurring items Profit Before tax Tax PAT Share of Profits/ (Losses) of Asso. Share of Profits/ (Losses) of MI PAT after MI and Share of Asso. PAT (%) Adjusted PAT Adj. PAT (%) FDEPS (`)
Source: Company, Angel Research

1QFY12 2,263 2,082 180.9 8.0 113.3 61.7 3.0 8.9 21.6 (12.7) 3.3 (2.9) (12.2) (0.5) (12.7) (0.6) (0.4)

1QFY11 1,734 1,600 134.1 7.7 81.0 64.0 4.1 (6.9) 23.5 (30.4) 2.1 (2.3) (30.6) (1.8) (30.6) (1.8) (0.9)

% yoy chg 30.5 30.2 34.9 30bp 39.9 (3.7) (230.1) (8.2) (58.4) (60.0) (58.6) -

4QFY11 2,326 2,118 208.0 8.9 98.9 69.9 5.7 44.9 26.5 18.5 (2.7) 1.9 17.7 0.8 18.5 0.8 0.5

% qoq chg (2.7) (1.7) (13.0) (90)bp 14.6 (11.8) -

FY2011 8,166 7,545 621.2 7.6 356.8 269.2 20.7 15.9 66.3 (50.4) 2.3 (3.0) (51.1) (0.6) (51.1) (0.6) (1.5)

FY2010 10,539 10,320 218.3 2.1 306.3 227.0 13.6 322.4 21.0 137.3 (116.3) 9.5 (1.7) (108.4) (1.1) (366.3) (3.5) (3.3)

% chg (22.5) (26.9) 184.5 550bp 16.5 18.6 52.2 (24.2) (51.7) (56.6) -

Healthy top-line growth

For 1QFY2012, Punj posted 30.5% yoy top-line growth to `2,263cr (`1,734cr). Barring 4QFY2011, this is quite an impressive performance when compared to the last seven quarters. As per management, high inflation, interest costs and commodity prices along with intense competition and political concerns across various geographies have resulted in the overall environment becoming very difficult. During the quarter, Punj withdrew its financial support to Simon Carves; and Simon Carves has been placed in administration in accordance with the laws of England. Further, PL Engineering has entered into an asset purchase agreement through its UK subsidiary, Simon Carves Engineering Ltd. (SCEL), for the transfer of certain assets, contracts and employees of Simon Carves to SCEL. On the pending arbitrations and auditor qualification on various projects, there has been no progress during the quarter.

August 16, 2011

Punj Lloyd | 1QFY2012 Result Update

Exhibit 2: Signs of pick-up in execution

3,500 3,000 2,500 2,000 1,500 1,000 500 0 54.5 47.4 37.4 12.2 (1.9) (6.9) (30.8)(27.0) (44.9)(41.7) 60.0 30.9 30.5 40.0 20.0 (20.0) (40.0) (60.0)

Exhibit 3: Quarterly order inflow and backlog

30,000 25,000 20,000 15,000 10,000 5,000 -

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11
6.0 4.0 2.0 (2.0) (4.0) (6.0) (8.0)

Sales (` cr, LHS)

Growth (yoy %, RHS)

Order Inflow (` cr, LHS)

Order Book (` cr, LHS)

Source: Company, Angel Research

Source: Company, Angel Research

Margin stable, earnings slip back in red

The companys EBITDA margin for the quarter stood at 8.0% against 7.7% in 1QFY2011. Going ahead as well, management is confident that the company will be able to maintain its EBITDA margin at 811%. Interest and depreciation cost came in at `113.3cr (`81.0cr) and `61.7cr (`64.0cr), respectively. Interest cost jumped by 39.9% yoy and 14.6% qoq. On the earnings front, the company reported loss of `12.7cr against loss of `30.6cr in 1QFY2011 on account of high interest cost and tax.

Exhibit 4: EBITDAM expected to stay at 811%

400 300 200 100 0 (100) (200) (300) (400) (500) (600) 10.2 (2.6) (2.2) 10.4 7.4 7.7 7.7 9.2 4.5 8.9 8.0 15.0 10.0 5.0 (5.0) (10.0) (15.0) (20.0) (25.0) (30.0) (35.0)

Exhibit 5: High interest cost dents profitability

200 150 100 50 0 (50) (100) (150) (200) (250) (300) 4.9 4.2 1.8 0.5 (1.8) (1.8) 1.2 (2.8) 0.8 (0.6)

(29.0)

(7.2)

(8.1)

(10.0)

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

EBITDA (` cr, LHS)

EBITDAM (%, RHS)

PAT (` cr, LHS)

PATM (%, RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Order book analysis

As per management, order inflow during CY2011 came at ~`5,627cr, taking the outstanding order book to `23,938cr (3.0x FY2011 revenue). The companys order book is dominated by the infrastructure (37.8%) and pipeline (25.6%) segments. Geographically, South Asia contributes 49.7% to the companys order book, followed by Asia Pacific and Africa, which contribute 23.6% and 16.6%, respectively.

August 16, 2011

1QFY12

1QFY12

Punj Lloyd | 1QFY2012 Result Update

Exhibit 6: Order backlog Sector wise (` cr)

Exhibit 7: Order backlog Geography wise (` cr)

Source: Company, Angel Research

Source: Company, Angel Research

Outlook and valuation

The infrastructure sector has been marred by concerns such as high interest cost, margin pressure due to high commodity prices and poor award activity across segments. On account of these concerns and continued disappointing performance since the last few quarters, the stock has demonstrated huge underperformance over the last 12 months on the bourses. We have valued Punj on 1x P/BV (FY2013) and have arrived at a fair value of `96. Although the stock offers an upside of 71.4% from current levels, we continue to maintain our Neutral view on the stock due to the headwinds faced by the sector and overhangs (mentioned above) on Punj.

Exhibit 8: Angel EPS forecast vs. consensus

Angel Forecast FY2012E FY2013E
Source: Company, Angel Research

Bloomberg consensus 3.5 6.3

Variation (%) 41.7 55.1

2.5 4.0

August 16, 2011

Punj Lloyd | 1QFY2012 Result Update

Exhibit 9: Recommendation Summary

Company CCCL HCC IRB Infra IVRCL JP Assoc. Punj Lloyd NCC Sadbhav Simplex In. Patel Engg Madhucon L&T ITNL CMP 22 28 156 40 57 56 54 143 280 105 71 186 TP Rating FY11 - Neutral - Neutral 191 64 108 82 161 306 106 259 Buy Buy Buy Buy Accu. Accu. Buy Buy Buy 2,199 4,093 2,438 5,651 7,850 5,074 2,209 4,896 3,499 1,705 4,049 Top-line (` cr) FY12E 2,362 4,723 3,024 5,798 2,646 5,485 3,995 6,994 9.7 15.8 11.2 19.0 14.8 13.9 2.5 1.2 5.9 3.1 6.4 8.0 EPS (`) 1.5 0.7 13.0 4.3 5.1 2.5 5.5 8.4 22.3 15.5 6.7 64.9 23.9 3.6 1.2 14.5 6.3 6.8 4.0 6.7 11.4 30.6 23.0 8.4 80.0 25.3 18.4 1.0 3.3 3.3 48.8 2.4 19.6 10.4 11.8 10.2 20.9 6.4 8.7 (1.9) 5.5 2.2 18.6 4.0 8.8 11.2 1.2 3.5 21.6 0.8 Adj. P/E 14.8 (3.3) 5.8 3.0 11.1 22.6 4.7 8.3 12.6 1.5 3.6 18.2 0.7 6.2 (1.9) 5.1 2.0 8.4 13.9 3.9 6.1 9.1 1.0 2.9 14.8 0.7 OB/ 2.8 4.2 4.2 3.0 3.2 3.2 2.9 2.7 3.5 3.1 5.5 FY13E CAGR (%) FY11 FY12E FY13E CAGR (%) FY11 FY12E FY13E Sales(x)

28.0 13.6

13,217 15,860 18,708 9,585 10,992 5,755 2,602 5,373 3,272 1,898 4,910 6,689 2,865 6,221 3,587 2,434 6,484

- Neutral

18.3 (5.4)

12.7 25.1 1.2 18.4 19.5 6.9 23.1 54.7 26.5 22.3

- Neutral

1,622 1,946

43,905 52,765 66,551

Source: Company, Angel Research

Exhibit 10: SOTP break-up

Company CCCL HCC IRB Infra IVRCL JP Assoc. Punj Lloyd NCC Sadbhav Simplex In. Patel Engg Madhucon L&T ITNL Core Const. ` 28 11 110 44 32 96 53 87 306 61 59 1,508 90 % to TP 100 26 58 69 30 100 65 54 100 43 55 77 35 Real Estate ` 23 31 2 47 2 % to TP 58 29 2 33 2 Road BOT ` 6 77 8 73 16 33 143 % to TP 16 40 10 46 11 31 55 Invst. In Subsidiaries ` 5 20 438 % to TP 2 31 23 ` 44 18 19 12 25 Others % to TP 41 22 14 12 10 Total ` 28 40 191 64 108 96 82 161 306 143 106 1,946 259

Source: Company, Angel Research

August 16, 2011

Punj Lloyd | 1QFY2012 Result Update

Profit & Loss Statement (Consolidated)

Y/E March (` cr) Net Sales Other operating income Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Asso Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of asso. Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2008 7,753 7,753 51.2 7,061 2,828 3,340 892 692.2 68.7 8.9 146.8 545.3 79.3 7.0 180.6 81.1 18.2 445.8 68.2 (37.1) 482.9 123.5 359.4 0.1 357.8 328.1 66.6 4.2 10.8 9.9 66.6 FY2009 FY2010 FY2011 FY2012E FY2013E 11,912 10,448 53.6 3,751 6,429 1,292 440.4 (36.4) 3.7 177.1 263.3 (51.7) 2.2 351.9 71.1 (406.1) (103.9) 1.3 226.0 (12.3) 3,770 4,968 1,345 364.5 (17.2) 3.5 227.0 137.5 (47.8) 1.3 387.4 108.5 708.0 21.0 137.2 654.4 (1.7) 11,912 10,448 11,472 10,083 7,850 7,850 (24.9) 7,438 2,328 3,985 1,126 411.1 12.8 5.2 269.2 141.9 3.2 1.8 463.5 188.5 (5.9) 15.9 66.3 417.3 (50.4) (3.0) (59.5) (2.3) (5.4) (5.4) 9,585 9,585 22.1 8,786 2,770 4,783 1,083 150 798.9 94.3 8.3 277.0 521.9 267.7 5.4 488.8 80.0 70.8 113.1 (185.0) 113.1 30.5 27.0 82.5 82.5 82.5 0.9 2.5 2.5 10,992 10,992

14.7
10,065 3,177 5,485 1,242 161 927.2

16.1 8.4
301.3 625.8

19.9 5.7
538.3 96.0 52.3 -

(76.7) (141.8)

(17.5) (141.4) (133.0) (18.8) (162.4) (148.9)

183.5 62.3
-

183.5
49.6

25.6 16,925.9 6.2 -

27.0
134.0

(224.7) (116.3)

134.0 134.0

(225.3) (108.4) (2.0) (7.9) (7.2) 51.1 (3.5) (10.9) (10.9) 51.1

(240.3) (363.2) (178.6)

62.3 1.2 4.0 4.0 62.3

August 16, 2011

Punj Lloyd | 1QFY2012 Result Update

Balance Sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Misc. Exp. not written off Total Assets 2,083 673 1,411 212 546 5,582 690 662 4,231 3,287 2,295 0 4,484 2,653 777 1,875 297 661 8,295 812 1,053 6,430 4,895 3,400 0 6,260 3,120 943 2,178 160 382 8,828 611 1,042 7,175 3,843 4,985 7,709 3,365 1,113 2,252 213 384 9,367 1,215 1,013 7,139 4,468 4,898 7,752 3,645 1,390 2,255 192 384 11,129 1,175 1,237 8,717 5,452 5,677 8,511
3,965 1,691 2,274 193

FY2008 60.7 2,657 2,743 22 1,607 111 4,484

FY2009 60.7 2,424 2,485 42 3,559 174 6,260

FY2010 66.4 2,961 3,027 42 4,455 184 7,709

FY2011 FY2012E FY2013E 66.4 2,912 2,979 74 4,542 156 7,752 66.4 2,981 3,047 74 5,234 156 8,511
66.4

3,100 3,167 74 5,532 156 8,929

384 12,309 894 1,419 9,997 6,235 6,074 8,929

August 16, 2011

Punj Lloyd | 1QFY2012 Result Update

Cash Flow statement (Consolidated)

Y/E March (` cr) Profit Before Tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in Fixed Assets (Inc.)/Dec. in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2008 483 147 1,091 81 123 (666) (352) (376) 81 (646) 1,130 (92) 14 (25) 999 (313) 1,003 690 FY2009 1 177 983 71 226 (1,101) (653) (115) 71 (697) 1,952 11 (20) 1,921 122 690 812 FY2010 21 227 1,786 108 137 (1,783) (338) 279 108 50 648 896 6 (6) 1,532 (201) 812 611 FY2011 FY2012E FY2013E 16 269 (690) 189 66 721 (297) (2) 189 (111) (8) 87 6 (79) (6) 604 611 1,215 113 277 818 80 31 (539) (259) 80 (179) 692 14 677 (40) 1,215 1,175 184 301 678 96 50
(339)

(322) 96
(226)

298 14
284 (281) 1,175 894

August 16, 2011

Punj Lloyd | 1QFY2012 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Order Book/Sales (x) Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROAE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage 0.3 1.3 3.0 1.1 6.2 0.7 1.3 10.5 0.4 1.1 8.1 0.3 1.3 5.1 1.1
1.5 5.0 1.2

FY2008 FY2009 5.7 3.6 0.6 0.8 0.4 4.0 0.6 2.6 10.8 9.9 15.7 0.5 90.4 7.0 74.4 2.7 13.9 8.1 0.3 15.6 14.5 18.7 16.3 3.9 84 78 147 50 0.7 0.6 0.4 10.5 0.7 1.7 (7.9) (7.2) (2.1) 0.4 81.9 2.2 2.6 0.7 4.9 5.7 (9.2) 5.0 88 73 125 64

FY2010 0.6 0.3 0.5 15.7 0.7 2.7 (10.9) (10.9) (4.1) 0.2 91.2 1.3 1.7 1.1 2.0 2.2 (13.2) 3.6 145 85 151 122

FY2011 FY2012E FY2013E 20.6 0.6 0.3 0.7 12.6 0.7 2.4 (5.4) (5.4) 2.7 0.2 89.7 1.8 1.2 1.2 1.8 2.1 (5.9) 2.4 221 102 194 187 22.6 5.2 0.6 0.8 0.6 7.4 0.7 2.7 2.5 2.5 10.8 0.4 91.8 5.4 73.0 1.4 5.5 7.3 1.2 3.3 6.4 7.5 2.7 2.7 205 93 197 156
13.9 4.3 0.6

0.8
0.6 7.0 0.7 3.2 4.0 4.0 13.1

0.4
95.4 5.7 73.0

1.4
5.9 7.3 1.4 4.1

7.2
8.1 4.3 2.9 211 96 203 161

August 16, 2011

Punj Lloyd | 1QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbrokling.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Punj Lloyd No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

August 16, 2011

10