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Orbit Corporation Equity Research

HomeCompanyOrbit Corporation Equity Research

Date of Research – 20 January 2016

Price – Rs. 6.48

About the Company

Orbit Corporation Limited (“Orbit Corp” or the “Company”) is among India’s top 10 listed real estate developers and South Mumbai’s preferred luxury home developer.

Orbit Corp primarily deals in high end luxurious apartments and office spaces located in posh areas of South Mumbai. The Company also aims to tap redevelopment opportunities in the island city of Mumbai, specifically in the premium locales of South Mumbai.

Location: Napeansea Road, Gamdevi, Prarthana Samaj, Tardeo and Lower Parel.

Project under development: 12 projects with approximately 1.84 million sq. ft. In addition, the Company has strong pipeline of around 5.4 million sq. ft. of residential projects including a gated community project in Mandwa.

Key Financial Figures

Consolidated (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Total Income from Operations 382.57 298.97 36.01 135.07 1.96 
Expenses 232.72 148.96 81.81 40.79 190.71  
Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit) 149.85 150.00 (45.80) 94.27 (188.75) 
Depreciation 6.01 5.22 4.70 3.19 2.88  
Finance Costs 119.28 154.53 188.96 177.89 181.53  
Other income 8.34 11.94 12.86 6.02 10.85  
Exceptional items 23.99 – 
PBT 32.90 2.20 (226.60) (104.78) (362.31) 
Tax 19.17 (7.60) (66.08) (2.43) 0.02  
PAT (before Minority Interest and share of Associates) 13.72 9.80 (160.53) (102.35) (362.33) 
Profit/ (loss) attributable to Minority Interest 2.02 2.27 (4.28) (0.80) (3.20) 
Share of profit / (loss) of Associates – 
Consolidated Profit / (Loss) for the year 11.70 7.53 (156.24) (101.56) (359.13)- 

Profitability Analysis

Consolidated (%)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Operating Profit Margin Ratio 39.17 50.17 (127.19) 69.80 – 
Net Profit Margin Ratio 3.59 3.28 (445.79) (75.78) – 

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies.

Key Balance Sheet Figures

Sources of Funds / Liabilities (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Share Capital 113.96 113.96 113.96 113.96  
Other components of equity 0.44  
Reserves & Surplus 935.05 942.57 786.82 683.99  
Employee stock options grants  
Net worth (shareholders funds) 1,049.01 1,056.53 900.78 798.39  
Minority Interest 130.92 137.86 133.58 128.15  
Long term borrowings 243.84 436.67 425.22 383.10  
Current liabilities 929.03 838.17 1,159.62 1,224.94  
Other long term liabilities and provisions 145.38 168.70 49.96 44.39  
Deferred Tax Liabilities 46.72 24.88  
Total Liabilities 2,544.89 2,662.81 2,669.15 2,578.95  

 

Application of Funds / Assets (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Fixed Assets 29.39 28.49 24.73 17.95  
Noncurrent Investments 0.06 3.88 3.88 0.06  
Current assets 1,555.93 1,617.83 1,660.91 1,635.67  
Long term advances and other noncurrent assets 955.61 1,007.71 934.56 877.87  
Deferred Tax Assets 3.91 4.05 44.22

47.40

 
Goodwill on consolidation (net) 0.84 0.85  
Total assets 2,544.89 2,662.81 2,669.15 2,578.95  

Efficiency Analysis

 
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
ROCE 10.52 9.20 (3.14) 7.20  
ROE / RONW 1.12 0.71 (17.34) (12.72)  

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

Valuation Analysis

Consolidated
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Total Income from Operations (Rs. Cr.) 382.57 298.97 36.01 135.07 1.96 
Growth (%) (4.15 %) (21.85 %) (87.96 %) 275.08 % (98.55 %) 
PAT (Rs. Cr.) 13.72 9.80 (160.53) (102.35) (362.33) 
Growth (%) (82.61 %) (28.57 %) (1,738.06 %)
Earnings Per Share – Basic (Rs. ) 1.03 0.66 (13.71) (8.91*)  (31.51)
Earning Per Share – Diluted (Rs. ) 1.03 0.66 (13.71) (8.91*) (31.51) 
Price to Earnings 50.53 38.79

Dividend History

The Company has not declared any dividend over the last 5 financial years

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook. Orbit Corp’s average current ratio over the last 5 financial years has been 2.95 times which indicates that the Company is comfortably placed to pay for its short term obligations.

Long Term Debt to Equity Ratio

Companies operating with high long term debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations.

Orbit Corp’s average long term debt to equity ratio over the last 5 financial years has been 0.49 times which indicates that the Company operates with manageable level of debt and is placed well to withstand economic slowdowns.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.

Orbit Corp’s average interest coverage ratio over the last 5 financial years has been 0.93 times which indicates that the Company can meet its debt obligations without any difficulty.

Ownership pattern

In its latest stock exchange filing dated 31 March 2016, Orbit Corp reported a promoter holding of 21.98 %.

At the same time, institutional holding in the Company stood at 0.95 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.

 

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