Dear All,
Forwarding you the Result Update on IRB for 4QFY2011 with a Buy recommendation and a Target Price of `215 (12 months).
IRB Infrastructure’s (IRB) consolidated numbers were in line with our estimates as revenue and margins came as per our expectations, while slippage in earnings was due to one-off mark-to-market (MTM) loss of ~`54cr on the derivative contract (Mumbai Pune project). In recent times, NHAI has witnessed lot of activity and the momentum is expected to continue, which would benefit road developers as orders galore. IRB having one of the largest BOT project portfolios with an integrated business model is expected to be the key beneficiary of the same. Also, the stock has underperformed in the recent times on the bourses, which has brought the stock to attractive levels. Hence, we upgrade the stock to Buy from Accumulate.
In-line results; MTM loss finally booked: IRB reported robust top-line growth of 52.9% to `767.0cr (`501.7cr), in line with our estimate of `748.0cr. The C&EPC segment reported top line of `578.4cr against our expectations of `530.5cr. We believe the construction segment has posted robust numbers due to pick-up in execution of Amritsar Pathankot, Talegaon Amravati and Jaipur Deoli projects. On the operating front, IRB’s margins came at 41% (46%), exactly as per our estimate, reporting a dip of 500bp yoy, on account of increased contribution from the low-margin C&EPC segment as expected. The bottom line came at `102.8cr, lower than our estimates on account of a ~70% jump in interest cost (including `54cr of MTM loss) on a yoy as well as qoq basis.
Outlook and valuation: Award activity by NHAI has picked up in the last couple of months. Further, NHAI has targeted to award orders worth ~`57,000cr (~8,000km) till January 2012 and another 1,000km on Annuity/EPC basis, and 1,000km state highway projects are expected to be awarded in FY2012; this augurs well for the sector. We believe this presents abundant opportunities for road developers (read IRB). IRB has a robust order book (excluding O&M orders) of `9,652cr (5.8x FY2011 construction revenue), which lends high revenue visibility for the next two-three years. Further, the stock is trading at attractive valuations; hence, we recommend Buy on the stock with an SOTP target price of `215.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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