Experienced management; and established track record in civil works relating to thermal power plants
CCPL has been engaged in execution of civil works for nearly a decade. The company is currently managed by Mr. Narra Sakaar, Ms. Nimmagadda Harshitha and others, are supported by well-qualified and experienced team of professionals to execute the projects. The company operates in the states of Andhra Pradesh, Telangana, and Tamil Nadu; providing geographic diversification in its work execution. CCPL has adequate experience in executing projects like Yadadri thermal power plant and Bhadradri thermal power plant in Telangana and Tuticorn power plant in Tamil Nadu among others. However, over 95 percent of the order book caters to BHEL leading to significant customer concentration risk. Over 90 percent of revenue is through primary contracts and balance revenue is from sub-contracting activities. Currently company is engaged in execution of structuring works for thermal power plants in Telangana, Andhra Pradesh and Tamil Nadu.
Acuité believes that the promoter's extensive industry experience backed by established track record in thermal power plant related civil works will aid CCPL's business risk profile over the medium term.
Growth in turnover backed by healthy order book position
CCPL’s operating revenue has increased to Rs. 34.87 Cr in FY2022 from Rs.27.40 Cr in FY2021, further operating profits improved from Rs.2.12 Cr in FY2021 to Rs.2.37 Cr in FY2022 with decrease in operating margin from 7.73 percent in FY2021 to 6.80 percent in FY2022. Further, the revenue stood at Rs 45.23 Cr in FY 2023 (Prov.). Though there is an increase in scale of operations it still is moderate. However, the order book position of the company stood healthy at Rs.146.76 Cr as on December 2022 and another order of Rs101.33 Cr is at final stage of allotment providing adequate revenue visibility over near to medium term.
Acuite believes that revenue of the company may scale up in near to medium term backed by healthy order book.
Moderate financial risk profile
CCPL’s financial risk profile is moderate marked by moderate capital structure and moderate coverage indicators. CCPL's net worth stood at Rs.6.21 Cr as on March 31st 2022 as against Rs. 6.07 Cr as on March 31st 2021. Net worth is expected to remain moderate on account of stable accretion to reserves. The debt protection metrics of interest coverage ratio and debt service coverage ratio stood at 3.21 times and 2.25 times respectively as on March 31st 2022 as against 2.58 and 1.54 times respectively as on March 31st 2021. The net cash accrual to debt ratio stood at 0.18 times as on March 31st 2022 as against 0.19 times as on March 31st 2021. The total outside liabilities to tangible net worth stood at 3.99 times as on March 31st 2022 as against 3.32 times as on March 31st 2021.
Acuite believes that the financial risk profile is likely to remain moderate over medium term in absence of any debt funded capex.
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Working capital intensive operations
CCPL's working capital operations are intensive as reflected by Gross current asset (GCA) days of 287 days for FY2022 as against 306 days in FY2021, improvement in GCA days is due to reduction in inventory days to 26 days in FY2022 from 45 days in FY2021. The higher GCA days led to moderate utilization of its working capital limits at about 86.80 percent for fund based and utilisation of 82.28 percent for non-fund based for the past 12 months ended December 2022. Creditor days decreased from 65 days in FY2021 to 57 days in FY2022, Debtor days remained stable at 95 days in FY2022 and 94 days in FY2021. The GCA days are majorly constituted by the other current assets which is a retention money to be received.
Acuite believes that working capital operations may continue to remain intensive in medium term considering the nature of business.
Customer concentration risk
CCPL being a specialised contractor in execution of civil works related to thermal power plants has led to increased dependence for contractual work from BHEL, power mech projects and few other players. The same has led to customer concentration risk as 95 percent of contracts are from single contractee ~BHEL.
Acuité believes that CCPL's revenues and margins are susceptible to the customer concentration risk.
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