Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IVRCL Infrastructure & Proj
Good 3Q as execution bounce +32%QoQ & margins surprise
„Rec PAT 10% - sales +20%; margins +98bps; Stock bottom-out
IVRC had good 3Q with Rec. PAT Rs504mn +10%YoY (+7%BofAMLe) on better
execution (+20%YoY) and 98bps margin expansion on overhead absorption,
which was partly off-set by 61%YoY higher interest cost. We have cut our FY11-
13E EPS by ~6-16% to factor-in +200bps interest rates & CB re-payment, despite
similar sales / EBITDA. Cut PO to Rs175 (210) to factor-in EPS cut and sector derating (12x v/s 10x).
Buy IVRC on: a) pick-up in execution from 3QFY11 on
resurgence in road orders & equity funding at IVR Asset, b) benign material prices
and c) peaked fixed costs, drive 22% EPS CAGR over FY11-13E vs flat FY08-10
and d) stock is inexpensive in our view at 2x (core business) FY12E EPS.
Backlog +27%YoY on shift to Maharashtra; Margins surprise
Order backlog at Rs225bn +27%YoY and -2%QoQ (~2.9x FY12E sales) led by
big ticket orders wins from Maharashtra and NHAI. It also emerged as L1 for
Rs20bn (9% of backlog) of projects. IVRC has won Rs48bn of new road projects
in 9M which lead to shift in backlog to Maharashtra / Goa ~34% v/s slow moving
backlog of AP ~16% and addition of Rs19.8bn international orders in 3Q. IVRC
improved execution in AP with 3Q booking of Rs1bn of sales (Rs2.5n in 9MFY11).
3Q EBITDA Rs1.5bn +32%YoY / +60%QoQ on better execution (sales +20%YoY
and 32%QoQ) along with +98bps YoY / +187bps QoQ expansion margin. While
Rec. PAT Rs504mn +10%YoY and 116%QoQ on 61%YoY / 23%QoQ higher
interest cost on 228bps QoQ higher interest rate. Rep PAT Rs423mn -8%YoY on
write-off of Rs120mn on TN projects outstanding for more than 3 years.
Bullish on Roads; Parent balance sheet is OK on funding
We see mgt's renewed bullishness on roads as key driver of surprise ahead. Road
BOOT model has improved on a) higher govt. Grant (40%), b) Govt. support on land
acquisition and c) inflation adjusted toll, which protect v/s higher rates. IVRC has a well
funded balance sheet to meet this growth - net D/E of 0.62x in FY11E, but its Infra
arm, IVR Asset, will raise balance equity to fund new assets, in our view.
Price objective basis & risk
IVRCL Infrastruc (IIFRF)
Our PO of Rs175 is based on SOTP valuation. We have valued IVRCL core
construction business at 10x PER of 1-year forward EPS, a 40pct discount to
E&C majors at Rs124 per share. Hind-dorr-Oliver where IVRCL has 55pct stake
is valued at CMP giving a per share value of Rs17. IVR Assets, where IVRCL has
80.5pct stake, real estate business is valued at 50pct discount to NPV at Rs10
per share in line with Mid Cap real estate companies. Chennai desalination plant
where IVRCL has 60.3pct stake is valued on a DCF basis at Rs4 per share.
Similarly, Jalandhar-Amritsar project, Kumarapalayam-Chengapally project, and
Salem-Kumarapalayam project where IVRCL has 80.5pct stake are valued based
on DCF of Rs3, Rs9 and Rs8 per share respectively. We arrive at an SOTP value
of Rs175 per share. Risks: Unrelated acquisition in Oil & Gas space, Government
capex, raw material costs, competition, traffic/interest rate risk in toll/annuity
projects and project execution risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IVRCL Infrastructure & Proj
Good 3Q as execution bounce +32%QoQ & margins surprise
„Rec PAT 10% - sales +20%; margins +98bps; Stock bottom-out
IVRC had good 3Q with Rec. PAT Rs504mn +10%YoY (+7%BofAMLe) on better
execution (+20%YoY) and 98bps margin expansion on overhead absorption,
which was partly off-set by 61%YoY higher interest cost. We have cut our FY11-
13E EPS by ~6-16% to factor-in +200bps interest rates & CB re-payment, despite
similar sales / EBITDA. Cut PO to Rs175 (210) to factor-in EPS cut and sector derating (12x v/s 10x).
Buy IVRC on: a) pick-up in execution from 3QFY11 on
resurgence in road orders & equity funding at IVR Asset, b) benign material prices
and c) peaked fixed costs, drive 22% EPS CAGR over FY11-13E vs flat FY08-10
and d) stock is inexpensive in our view at 2x (core business) FY12E EPS.
Backlog +27%YoY on shift to Maharashtra; Margins surprise
Order backlog at Rs225bn +27%YoY and -2%QoQ (~2.9x FY12E sales) led by
big ticket orders wins from Maharashtra and NHAI. It also emerged as L1 for
Rs20bn (9% of backlog) of projects. IVRC has won Rs48bn of new road projects
in 9M which lead to shift in backlog to Maharashtra / Goa ~34% v/s slow moving
backlog of AP ~16% and addition of Rs19.8bn international orders in 3Q. IVRC
improved execution in AP with 3Q booking of Rs1bn of sales (Rs2.5n in 9MFY11).
3Q EBITDA Rs1.5bn +32%YoY / +60%QoQ on better execution (sales +20%YoY
and 32%QoQ) along with +98bps YoY / +187bps QoQ expansion margin. While
Rec. PAT Rs504mn +10%YoY and 116%QoQ on 61%YoY / 23%QoQ higher
interest cost on 228bps QoQ higher interest rate. Rep PAT Rs423mn -8%YoY on
write-off of Rs120mn on TN projects outstanding for more than 3 years.
Bullish on Roads; Parent balance sheet is OK on funding
We see mgt's renewed bullishness on roads as key driver of surprise ahead. Road
BOOT model has improved on a) higher govt. Grant (40%), b) Govt. support on land
acquisition and c) inflation adjusted toll, which protect v/s higher rates. IVRC has a well
funded balance sheet to meet this growth - net D/E of 0.62x in FY11E, but its Infra
arm, IVR Asset, will raise balance equity to fund new assets, in our view.
Price objective basis & risk
IVRCL Infrastruc (IIFRF)
Our PO of Rs175 is based on SOTP valuation. We have valued IVRCL core
construction business at 10x PER of 1-year forward EPS, a 40pct discount to
E&C majors at Rs124 per share. Hind-dorr-Oliver where IVRCL has 55pct stake
is valued at CMP giving a per share value of Rs17. IVR Assets, where IVRCL has
80.5pct stake, real estate business is valued at 50pct discount to NPV at Rs10
per share in line with Mid Cap real estate companies. Chennai desalination plant
where IVRCL has 60.3pct stake is valued on a DCF basis at Rs4 per share.
Similarly, Jalandhar-Amritsar project, Kumarapalayam-Chengapally project, and
Salem-Kumarapalayam project where IVRCL has 80.5pct stake are valued based
on DCF of Rs3, Rs9 and Rs8 per share respectively. We arrive at an SOTP value
of Rs175 per share. Risks: Unrelated acquisition in Oil & Gas space, Government
capex, raw material costs, competition, traffic/interest rate risk in toll/annuity
projects and project execution risk.
No comments:
Post a Comment