PEL reported a surprise topline growth of 33% YoY for Q4FY11 but bottomline dipped by 50%YoY, due to lower operating profit at 8.1% vs 12.6% in Q4FY10. During the quarter interest cost jumped by 58% YoY to Rs728mn, which includes interest cost of ~Rs250mn towards its Noida real estate project. Adjusting for sale of property in Jogeshwari, operating margin further dips to 5.6% (Cons) and 4.2% (Stand) and adj conso PAT posted a loss of Rs90mn. In all a bad quarter, we downgrade our recommendation to HOLD.

Real estate boosts revenue during quarter

During the quarter, PEL has booked revenue ~Rs3.3bn from its Noida real estate project, which boosted its revenue to Rs15.9bn, a 33% YoY growth. For full year, PEL booked revenue of ~Rs4.4bn which is including Bangalore project. PEL sold its ‘Patel Corporate Park’, during the quarter, which is located near its corporate office, with a built up area of 80,000sqft for a consideration of Rs760mn.

Operating margin dipped to 8.1%, adj OPM at 5.6%

OPM dipped to 8.1% during the quarter vs 12.6% in Q4FY10, PEL executed third party contract during the quarter to the tune of ~Rs3bn, which entails a margin of 3-4%, management opted for third party contract to avoid idling of workers & machinery. Further during the quarter NHAI has forfeited PEL’s Rs130mn following withdrawal of the company from Dhankuni-Kharagpur project is included in general & administrative exp, which further deteriorated the margin. PEL booked revenue of Rs760mn with a profit of Rs450mn on PBT level from the sale of Jogeshwari property, adjusting this one off item, PEL’s consolidated margin for the quarter dipped 5.6% with a net loss of Rs90mn, similarly on standalone basis margin has dipped to 4.2% with net loss of Rs78mn.

Executable order book at Rs65bn