IVRCL -Q2FY11: Conference call highlights:: UBS

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IVRCL (Buy, Price: Rs132.50; PT: Rs200)
Q2FY11: Conference call highlights
􀂄 Revenue guidance revised down to ~Rs65bn from ~Rs68bn earlier
IVRCL now expects revenues of ~Rs65bn in FY11 compared to ~Rs68bn
previously (UBS-e ~Rs67bn). Revenue-booking during Q2 was impacted by the
extended monsoon period and it believes the same is not recoverable in the
balance of the year. Though it expects a significant pick-up in execution activity
in H2 led by the transport and building segments. Order book is ~Rs228bn, L1
orders are ~Rs12bn and AP order backlog is ~Rs35bn (with direct orders to
IVRCL being ~Rs10bn). BOT projects contribute Rs50-55bn to this backlog.


􀂄 Margins boosted by one-offs, impacted by lower overhead absorption
The lower execution has impacted margins due to negative operating leverage
(lower overhead absorption) by 200-250bps. Additionally, there were one-offs
in the quarter, excluding which EBITDA margins would be ~7.2%. Overall the
company expects FY11 EBITDA margins at 9.5-9.75%, after excluding the
impact of one-offs (UBS-e for FY11 is 9.7%).

􀂄 Additional funding support to BOTs; debt expected to reduce by year-end
IVRCL has supported its road BOTs by ~Rs3.5bn, increasing its debt to Rs23bn.
It expects the same to reduce to ~Rs19bn by end-FY11. Capex in FY11 is
expected to be ~Rs1.8bn, due to increased purchases of road-construction
equipment.