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Top-line below our estimates
For 3QFY2011, IRB reported robust top-line growth of 54.4% to `668.8cr though
below our expectation of `775.1cr primarily due to the lower-than-expected
growth in the C&EPC segment. The segment reported top-line of `466.5cr as
against our expectation of `572.2cr. Major contribution for C&EPC revenue came
from Surat Dahisar project at ~`300cr, while Jaipur Deoli and Amritsar Pathankot
started contributing albeit marginally at `86cr with remaining projects sharing the
rest. Construction work on the Talegaon Amravati project has started. The Goa
Karnataka project is still at mobilisation stage, which we believe would start
contributing in the ensuing quarters.
Toll collections witnessed nominal growth of ~5-9% for the quarter. Average daily
toll collections is ~`2.7cr (gross basis) out of which Surat Dahisar contributes
~`1.4cr, Mumbai Pune’s share is `0.8cr, Bharuch Surat contributes `0.4cr and
other projects contribute the rest. Traffic growth for Surat Dahisar and Mumbai
Pune came at ~4-5% for the quarter.
Going ahead, IRB has given a guidance of adding BOT projects worth US $1bn
every year with the award activity expected to pick-up in the coming quarters.
Besides, the company has submitted bids for projects worth `49,000cr (Request for
Qualification (RFQ) and Request for Proposal (RFP) stage).
IRB continued to post above-industry EBITDA margins
IRB continued to surprise on the margin front posting EBITDA margins of 43.9% for
3QFY2011 as against our expectation of 37.8%. The company surprised by
posting EBITDA margin of 24.9% in the construction segment for the quarter, a yoy
jump of 340bp, and 490bp higher than our expectation which was mainly on
account of better material management and escalations in place to take care of
increasing raw material prices. However, we believe these margins are
unsustainable (acknowledged by the management) and expect them to normalise
at ~20% levels going ahead. In the BOT segment, IRB reported EBITDA margin of
88.4% v/s our expectation of 85.3%.
Overall bottom-line came at `133.0cr, which was in line with our estimate in spite
of the lower-than-expected top-line growth mainly on account of the following: 1)
higher-than-expected EBITDA margins in both the segments, 2) higher share of
BOT revenues leading to rise in blended EBITDA margins, and 3) lower tax
provision at ~17.5% mainly on account of the MAT benefit availed as against our
expectation of 20%. Adjusted for the MAT credit, bottom-line stood at `118.4cr.
Revision in estimates
For FY2011, we were penciling in top-line of ~`2,000cr from the C&EPC segment
marginally above management’s guidance of `1,800-1,900cr. However, given the
below expectation performance this quarter, we have pruned our estimates
downwards to `1,622.4cr. Further, to factor in the company’s stellar performance
on the margins front, we have revised upwards our margin estimate by 300bp for
FY2011. For FY2012, increase in interest cost has led to 3.1% pruning of bottomline.
Outlook and Valuation
The recent lull in the awarding activity has negatively impacted performance of the
infra sector on the bourses. The IRB stock has been dogged by unwarranted
concerns. However, given its leadership position in the Indian road BOT space and
strong execution with minimal outsourcing along with the recent correction in the
stock price, provides an attractive opportunity to enter the stock at current levels.
We have valued IRB on SOTP basis wherein we have valued the road BOT SPVs on
NPV basis (FY2012E) and accorded 10% growth premium fetching `133.8/share,
the construction segment has been valued at 8x FY2012E EV/EBITDA
(`125.3/share) and the other investments have been valued at 1.5x FY2010 P/BV
(`4.6/share). We maintain a Buy on the stock with the Target Price of `264.
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IRB Infrastructure – 3QFY2011 Result Update
Angel Broking maintains a Buy on IRB Infrastructure with a Target Price of Rs. 264.
IRB Infrastructure (IRB) reported a mixed performance for 3QFY2011. While
top-line came below our estimates, EBITDA margins continue to surprise us
positively and resultant bottom-line came in line. We have revised downwards our
FY2011 and FY2012 estimates to factor in lower C&EPC numbers and slowdown
in the award activity in recent times. We maintain a Buy on the stock.
Mixed performance: IRB reported robust top-line growth of 54.4% to `668.8cr
albeit below our expectations of `775.1cr primarily due to the lower-thanexpected
growth in the C&EPC segment, which reported top-line of `466.5cr v/s
our expectation of `572.2cr. IRB continued to surprise on the margin front and
posted EBITDA margins of 43.9% for the quarter v/s our expectation of 37.8%.
Bottom-line at `133.0cr was in line with our estimate in spite of the lower-thanexpected
top-line growth mainly on account of the following: 1) higher-thanexpected
EBITDA margins in both the segments, 2) higher share of BOT revenues
leading to rise in blended EBITDA margins, and 3) lower tax provision of ~17.5%
mainly due to the MAT benefit availed v/s our expectation of 20%.
Outlook and valuation: The recent lull in the awarding activity has negatively
impacted performance of the infra sector on the bourses. The IRB stock has been
dogged by unwarranted concerns. However, given its leadership position in the
Indian road BOT space and strong execution with minimal outsourcing along with
the recent correction in the stock price, provides an attractive opportunity to enter
the stock at current levels. We have valued IRB on SOTP basis wherein we have
valued the road BOT SPVs on NPV basis (FY2012E) and accorded 10% growth
premium fetching `133.8/share, the construction segment has been valued at 8x
FY2012E EV/EBITDA (`125.3/share) and the other investments have been valued
at 1.5x FY2010 P/BV (`4.6/share). We maintain a Buy on the stock with an SOTP
Target Price of `264.
Top-line below our estimates
For 3QFY2011, IRB reported robust top-line growth of 54.4% to `668.8cr though
below our expectation of `775.1cr primarily due to the lower-than-expected
growth in the C&EPC segment. The segment reported top-line of `466.5cr as
against our expectation of `572.2cr. Major contribution for C&EPC revenue came
from Surat Dahisar project at ~`300cr, while Jaipur Deoli and Amritsar Pathankot
started contributing albeit marginally at `86cr with remaining projects sharing the
rest. Construction work on the Talegaon Amravati project has started. The Goa
Karnataka project is still at mobilisation stage, which we believe would start
contributing in the ensuing quarters.
Toll collections witnessed nominal growth of ~5-9% for the quarter. Average daily
toll collections is ~`2.7cr (gross basis) out of which Surat Dahisar contributes
~`1.4cr, Mumbai Pune’s share is `0.8cr, Bharuch Surat contributes `0.4cr and
other projects contribute the rest. Traffic growth for Surat Dahisar and Mumbai
Pune came at ~4-5% for the quarter.
Going ahead, IRB has given a guidance of adding BOT projects worth US $1bn
every year with the award activity expected to pick-up in the coming quarters.
Besides, the company has submitted bids for projects worth `49,000cr (Request for
Qualification (RFQ) and Request for Proposal (RFP) stage).
IRB continued to post above-industry EBITDA margins
IRB continued to surprise on the margin front posting EBITDA margins of 43.9% for
3QFY2011 as against our expectation of 37.8%. The company surprised by
posting EBITDA margin of 24.9% in the construction segment for the quarter, a yoy
jump of 340bp, and 490bp higher than our expectation which was mainly on
account of better material management and escalations in place to take care of
increasing raw material prices. However, we believe these margins are
unsustainable (acknowledged by the management) and expect them to normalise
at ~20% levels going ahead. In the BOT segment, IRB reported EBITDA margin of
88.4% v/s our expectation of 85.3%.
Overall bottom-line came at `133.0cr, which was in line with our estimate in spite
of the lower-than-expected top-line growth mainly on account of the following: 1)
higher-than-expected EBITDA margins in both the segments, 2) higher share of
BOT revenues leading to rise in blended EBITDA margins, and 3) lower tax
provision at ~17.5% mainly on account of the MAT benefit availed as against our
expectation of 20%. Adjusted for the MAT credit, bottom-line stood at `118.4cr.
Revision in estimates
For FY2011, we were penciling in top-line of ~`2,000cr from the C&EPC segment
marginally above management’s guidance of `1,800-1,900cr. However, given the
below expectation performance this quarter, we have pruned our estimates
downwards to `1,622.4cr. Further, to factor in the company’s stellar performance
on the margins front, we have revised upwards our margin estimate by 300bp for
FY2011. For FY2012, increase in interest cost has led to 3.1% pruning of bottomline.
Outlook and Valuation
The recent lull in the awarding activity has negatively impacted performance of the
infra sector on the bourses. The IRB stock has been dogged by unwarranted
concerns. However, given its leadership position in the Indian road BOT space and
strong execution with minimal outsourcing along with the recent correction in the
stock price, provides an attractive opportunity to enter the stock at current levels.
We have valued IRB on SOTP basis wherein we have valued the road BOT SPVs on
NPV basis (FY2012E) and accorded 10% growth premium fetching `133.8/share,
the construction segment has been valued at 8x FY2012E EV/EBITDA
(`125.3/share) and the other investments have been valued at 1.5x FY2010 P/BV
(`4.6/share). We maintain a Buy on the stock with the Target Price of `264.
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