IRB Infrastructure-Q2FY11: Construction margins at 24% :: UBS

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UBS Investment Research
IRB Infrastructure Developers
Q2FY11: Construction margins at 24%,
Mumbai-Pune traffic growth at 4.6%
􀂄 Q2 PAT up 40% YoY, led by robust construction segment margins
IRB reported Q2FY11 revenues of Rs4.9bn (+38% y/y) and PAT of Rs991m
(+40% y/y; Rs908m adjusted for MAT credit). While revenues were below our
estimates, margins were substantially higher (both due to the construction
segment). H1FY11 PAT is Rs2.2bn (+42% y/y; Rs2bn adjusted for MAT credit).
􀂄 Surat-Dahisar daily collections increase 6.3% y/y in Q2FY11
Mumbai-Pune traffic growth was 4.6% in Q2FY11 (5.8% in H1FY10, 6.4% in
FY10). Except Mumbai-Pune and Thane-Godbunder, YoY traffic growth was
higher across other assets in H1FY11, compared to H1FY10 growth rates. Daily
gross toll-revenues in Surat-Dahisar has improved 6.3% y/y to Rs9m (Rs9.3m/day
in H1FY11, +9.8% y/y; we assume Rs10.4m in FY11; FY10 was Rs9.1m).
Bharuch-Surat toll revenues were Rs3.3m/day (UBS-e Rs4m in FY11; Rs3.5m in
FY10). We assume YoY traffic growth of 8% across assets for next five years.
􀂄 Construction segment EBITDA margins at 23.7%; revenues up 50% y/y
We estimate Q2 construction EBITDA margins at 23.7% (H1FY11 ~24%, FY10
18%). Segmental revenues were at Rs2.9bn in Q2 (H1FY11 construction revenues
at Rs6.1bn are up 34% y/y and EBITDA has increased 119% y/y).
􀂄 Valuation: SOTP-based PT of Rs260 with Sell rating
While IRB is well-positioned to leverage the strong sectoral opportunities, its
current multiples appear expensive and we maintain our Sell rating on valuations.