Conrad Industries Reports Q1 2013 Results ($CNRD)

Conrad Industries has posted its first quarter 2013 results [pdf]. Highlights:

• Revenue was up 18.5% year over year, gross profit was up 58% (15.9% margin vs 11.9%), and SG&A increased only 10 bps. 
• CFO in the quarter was $4 million and capex was $3.6 million. The "construction in progress" account increased by $3 million so that was obviously where most of the money went. Separately, the company breaks out capex by segment and says that repair and conversion capex was $2.7 million.
• Vessel construction revenue as up 16% year over year and repair was up 22%. Vessel margins were up 410 bps to 14% and repair margins were up 620 bps to 23%. We were predicting that there would be both increased revenue and higher margins, and so far this seems to be the case.
• In the quarter, 27.6% of revenues came from the offshore oil and gas industry.
• Backlog was up 77% year over year, and backlog man-hours were up 98% year over year.
• EBITDA for the quarter was $9.9 million, up 70%.

Conclusion: the expansion is repair focused, and repair margins and revenue are currently growing the fastest. We had said that this expansion is either incredibly smart or incredibly stupid, because a rational management would only spend money on expansion if the IRR exceeded that of share buybacks. Based on what is happening in the repair business, it looks more like the expansion is smart.

Here is an estimate of the current enterprise valuation:

So the EV is now ~$120 million, roughly where it was at the end of 2012, because the share price has gone up but it banked earnings during the first quarter of this year.

The company trades at 1.55x book value. Conrad peaked during the last cycle at $17.59 in September 2007. At that point, the diluted share count was approximately ~7.3 million for a market capitalization of $128.4 million, and book value was $43.5 million for a P/B of 2.95x.