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Anand Rathi
ITD Cementation (Buy)
Target: ₹63
CMP: ₹47.1
With the worst of the Covid’19-caused disruptions likely dealt with in Q1, ITDC’s recent strong order addition (hence, augmented OB) imply bright prospects.
The balance sheet too is in shape to reap the benefits of an augmented OB. Receipts from pending mobilisation advances from the recent orders would help. The near-complete status for some past projects would mean the drag from them on overall profitability would soon subside, and make way for better return ratios ahead.
Labour availability has already risen to nearly 70-78 per cent of the ideal 18,000-20,000 required. From the lows of about 8,500 at end-May 2020, this augurs well for the pace of execution now. Efforts are under way to get to the ideal count at the earliest.
Consequently, Q2 is expected to be better than Q1, and H2 FY21 is expected to be normal.
We retain our Buy rating owing to the strong OB, healthy opportunity landscape and comforting liquidity to scale up operations. With healthy inflows post-Q1 (firm as well as L1, totalling about ₹2,800 crore), the ₹11,300-crore order book at the end of Q1 is only expected to rise further.
Besides these, prospects too are bright with a ₹17,000-18,000-crore bid pipeline, largely favouring the margin accretive marine segment.
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