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UBS Investment Research
IRB Infrastructure Developers
Q3FY11: Construction margins at 23%,
Mumbai-Pune traffic growth at 4.9%
�� Q3 PAT up 46% YoY, led by robust construction segment margins
IRB reported Q3FY11 revenues of Rs6.7bn (+54% y/y), operating profit of
Rs2.9bn (+29% y/y, UBS-e Rs3bn) and PAT of Rs1.3bn (+46% y/y, UBS-e
Rs1.5bn). While revenues were below our estimates, margins were substantially
higher (both due to the construction segment). 9mFY11 PAT is Rs3.5bn (+43%
y/y) and operating profit is Rs7.8bn (+37% y/y, led by construction segment
EBITDA that is up 117% y/y; BOT segment EBITDA at Rs5.2bn is up 16% y/y).
�� Surat-Dahisar daily collections increase 9.3% y/y in Q3FY11
Mumbai-Pune traffic growth was 4.9% in Q3FY11 (4.8% in 9mFY11, 6.4% in
FY10). Except Mumbai-Pune and Thane-Godbunder, YoY traffic growth was
higher across other assets in 9mFY11, compared to 9mFY10 growth rates. Daily
gross toll-revenues in Surat-Dahisar has improved 9.3% y/y to Rs10.4m
(Rs9.7m/day in 9mFY11, +9.6% y/y; FY10 was Rs9.1m). Bharuch-Surat toll
revenues were Rs3.8m/day (+7.3% y/y; Rs3.5m/day in 9mFY11/FY10).
�� Construction segment EBITDA margins at 23%; revenues up 94% y/y
We estimate Q3 construction EBITDA margins at 23.4% (9mFY11 ~23.9%, FY10
~17%). Segmental revenues were at Rs4.6bn in Q3 (9mFY11 construction
revenues at Rs10.6bn are up 55% y/y and EBITDA has increased 117% y/y).
�� Valuation: Sell rating
We will revisit our estimates post the conference call at 11.30am on 28 January.
Our price target is based on SOTP valuation.
IRB Infrastructure Developers
IRB Infrastructure Developers (IRB) is one of the large BOT toll road operators
in India, managing 14 road projects through 11 subsidiaries. It is vertically
integrated with its construction subsidiary undertaking most aspects of BOT
road development. Its road assets are in the high economic-activity states of
Maharashtra and Gujarat. Its construction business caters primarily to in-house
projects with few third-party contracts. It has recently ventured into real estate
development through a township project near Pune.
Statement of Risk
Any slowdown in traffic growth will severely dent cash generation in IRB’s
assets. As toll roads are typically financed at a 70:30 debt equity ratio, any
interest rate increase will significantly increase cash outflows. Surat-Dahisar is
the largest project undertaken by IRB till date and may pose its own execution
challenges. IRB’s township project is unlikely to generate returns in near term
and therefore any further investment will depress return ratios. Any slowdown in
ordering activity of NHAI will affect IRB’s growth opportunities as it is
leveraged only to the road sector in India.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
IRB Infrastructure Developers
Q3FY11: Construction margins at 23%,
Mumbai-Pune traffic growth at 4.9%
�� Q3 PAT up 46% YoY, led by robust construction segment margins
IRB reported Q3FY11 revenues of Rs6.7bn (+54% y/y), operating profit of
Rs2.9bn (+29% y/y, UBS-e Rs3bn) and PAT of Rs1.3bn (+46% y/y, UBS-e
Rs1.5bn). While revenues were below our estimates, margins were substantially
higher (both due to the construction segment). 9mFY11 PAT is Rs3.5bn (+43%
y/y) and operating profit is Rs7.8bn (+37% y/y, led by construction segment
EBITDA that is up 117% y/y; BOT segment EBITDA at Rs5.2bn is up 16% y/y).
�� Surat-Dahisar daily collections increase 9.3% y/y in Q3FY11
Mumbai-Pune traffic growth was 4.9% in Q3FY11 (4.8% in 9mFY11, 6.4% in
FY10). Except Mumbai-Pune and Thane-Godbunder, YoY traffic growth was
higher across other assets in 9mFY11, compared to 9mFY10 growth rates. Daily
gross toll-revenues in Surat-Dahisar has improved 9.3% y/y to Rs10.4m
(Rs9.7m/day in 9mFY11, +9.6% y/y; FY10 was Rs9.1m). Bharuch-Surat toll
revenues were Rs3.8m/day (+7.3% y/y; Rs3.5m/day in 9mFY11/FY10).
�� Construction segment EBITDA margins at 23%; revenues up 94% y/y
We estimate Q3 construction EBITDA margins at 23.4% (9mFY11 ~23.9%, FY10
~17%). Segmental revenues were at Rs4.6bn in Q3 (9mFY11 construction
revenues at Rs10.6bn are up 55% y/y and EBITDA has increased 117% y/y).
�� Valuation: Sell rating
We will revisit our estimates post the conference call at 11.30am on 28 January.
Our price target is based on SOTP valuation.
IRB Infrastructure Developers
IRB Infrastructure Developers (IRB) is one of the large BOT toll road operators
in India, managing 14 road projects through 11 subsidiaries. It is vertically
integrated with its construction subsidiary undertaking most aspects of BOT
road development. Its road assets are in the high economic-activity states of
Maharashtra and Gujarat. Its construction business caters primarily to in-house
projects with few third-party contracts. It has recently ventured into real estate
development through a township project near Pune.
Statement of Risk
Any slowdown in traffic growth will severely dent cash generation in IRB’s
assets. As toll roads are typically financed at a 70:30 debt equity ratio, any
interest rate increase will significantly increase cash outflows. Surat-Dahisar is
the largest project undertaken by IRB till date and may pose its own execution
challenges. IRB’s township project is unlikely to generate returns in near term
and therefore any further investment will depress return ratios. Any slowdown in
ordering activity of NHAI will affect IRB’s growth opportunities as it is
leveraged only to the road sector in India.
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