MEP Infra Q3FY18 Concall Summary

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Financial Highlights

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  • The company closed the Q3 with revenue from operations on a consolidated basis at Rs.756.62 Crores as compared to Rs.289 C corresponding quarter in the last year
  • The quarter ended with an EBITDA of Rs.274.60 Crores and a profit after tax of Rs.24.86 Crores.
  • The revenue of the company was up by around approximately 95%
  • The robust growth in the revenues were due to commencement of Delhi entry point as well as the EPC revenues out of the four ongoing HAM projects
  • The company’s operational maintenance expenses were at Rs.457. 5 Cr due to incurrence of Rs.120.58 Cr on account of construction expenditure relating to the construction revenue, which has been booked, and also towards concession fee towards Delhi Entry Point
  • The company commenced its Delhi Entry Point, which has got an exit clause so because of this exit clause under Ind-AS 38, it been shown as a concession fee rather than an intangible asset
  • The EBIT margins for Q2FY18 stood at 20%
  • EBIT margin for the current quarter stood at 15.5%
  • In Q3FY18, depreciation and amortization stood at Rs.58 million vis-à-vis Rs.42 million and amortization is Rs.12 million correspondingly to Rs.188 million
  • The finance cost for this quarter declined by 0.4% due to Ind-AS adjustment of unwinding of trade payables
  • On an overall basis of nine months the finance cost is down by 6% because of repayments in the holding company
  • The PAT stood at Rs.247 million as compared to negative Rs.9 million because of higher EPC margin
  • The company expects to end the year between INR 650 to 700 Crores at the minimum
  • The company expects to earn 1400 to 1600 Crores in the FY2019
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Operatinal Highlights

  • MEP Infra is operating three long-term projects, three long-term OMT projects, one short-term and one long-term BOT project
  • The companyis also executing six hybrid annuity projects of which four are operational and two are near to receipt of the appointment dates
  • MEP Infra commenced tolling and ECC collection of 124 entry points to Delhi from October 1, 2017, against a payment of Rs.1206 Crores payable annually to the Municipal Corporation of Delhi
  • The company has also commenced the tolling operations on the Rajiv Gandhi Sea Link from October 3, 2017
  • The project was awarded for the second time in a row as an OMT contract for a period of three years in lieu of an upfront contractual payment of Rs.325 Crores paid to MSRDC upfront
  • The business is seeing a healthy and robust traffic growth across all over tolling assets in the last nine months and expects to continue to witness healthy traffic growth
  • MEP Infra is expecting to receive the appointment date of the last two HAM projects, which are ArawaliKante and KanteWakad, where the financial closure has been already achieved by the company
  • Currently, the company has an order book of Rs.3040 Crores as a part of the ECC work for its six hybrid annuity projects

Industry Outlook

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  • NHAI is yet to complete the construction in the length of around 3500 km against the average in the last five years of 2170 km to maintain the pace of construction
  • NHAI has already commenced works on 27 new projects covering 2330 km and will commence the work soon for another 50 projects covering over 3000 km
  • NHAI has invited bids for around 10460 km till January in the FY2017-2018
  • A lot of projects will be awarded before the financial end in March 2018, as there is a tremendous opportunity in the tolling space going forward as NHAI will also collect tolls on all the roads constructed by them.

Revenue Breakup

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  •  The revenue for Mumbai toll link is Rs.351.67 Crores, Delhi, it is Rs.328 Croresumbai, and for Rajiv Gandhi it is 83.2 Crores for Q1-Q3 2108
  • For Delhi toll link, the quarterly Concession fee is Rs.303 Crores

 Delhi Entry Point Project

  • There was a constant growth last quarter for the project
  • The project have around 124 points where the tolling is done
  • The company has deployed more than 2000 people on this particular project to ensure proper revenue collection is done and there are no leakages, which are attributing to any revenue loss.
  • The company is considering better efficiency in terms of doing the collection and reducing the number of leakages and also in terms of growth in traffic
  • MEP Infra expects annual revenues in the range of Rs.1350 to Rs.1370 Crores in the first year from this project

HAM Projects

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  • The bidding pipeline for HAM projects is close to Rs. 58000 to 60000 Crores
  • The total equity requirement is Rs.575 Crores
  • Out of which Rs.400 Crores is required to be deployed by MEP and Rs.175 Crores is deployable by the company’s JV Partner
  • Out of total equity requirement around Rs.250 plus Crores has already been infused by MEP Infra as of last quarter and the balance Rs.150 Crores is something MEP Infra will infuse over the next one-and-a-half-years to two years
  • The JV Partner has already infused 93 Crores which is commensurate with their shareholding percentage in each of those projects
  • Rs.1721 Crores is the total amount of funded debt is there across the six projects that the company has done financial closure for
  • 100 Crores of non-fund based debt financial closure has been done
  • Out of this debt across the six projects the company hascurrently withdrawn close to Rs.400 Crores

Future Prospects

  • Delhi Entry Point is a testimony of MEP Infra’s commitment towards tolling
  • The company has very deeply evaluated the current TOT projects
  • MEP Infra is closely following the possible NHAI new model where they may start coming with three to four years tolling contracts
  • The company has also evaluated certain key marquee state rather tolling contracts
  • The Company shall continue to operate in the tolling space and aspire to continue with the market share and binary status
  • MEP Infra is in a unique space where over 90%-95% of the tolling contracts are long-term contracts having very long-term visibility
  • The company has a visibility of tolling of over Rs.2000 Crores per year for the next four to five years, locked in into the existing portfolio

FY19 Financial Projections

  • The company is aiming for a 35%-40% HAM revenues and tolling revenues of the total revenue in FY2019
  • The main reason is the Delhi Entry Point Project getting a full year impact, so Rs.1350-Rs.1400 plus Crores of tolling coming from Delhi.
  • With over Rs.500 Crores tolling coming from Mumbai, over Rs.200 Crores of tolling coming from Hyderabad-Bangalore and over Rs.150 Crores coming from RGSL
  • There will be Rs.2200 to Rs.2300 Crores of tolling coming from the three to four projects
  • In addition the company aspires to continue to operate some of the state-run projects and other smaller or short term projects
  • The tolling revenue MEP Infra are targeting is in the range of around Rs.2400 to Rs.2600 Crores
  • With respect to HAM andEPC the company is aiming for Rs.1600 Crores conservatively ranging up to Rs.1800 Crores for the next year
  • Based on existing contracts on hand, if the company wins any new projects and adds any new work order of pipelines of course these numbers are projected increase