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IVRCL at par with peers on revenue visibility front: IVRCL has an
order book of ~`23,600cr (3.9x FY2011E revenues) of which
~37% (`5,300cr captive orders + `3,540cr AP orders) is
considered slow moving and markets are concerned over the
same. However, we believe that excluding these orders also
IVRCL's order book position is decent (refer exhibit below) at
`14,760cr (~2.4x FY2011E revenues). Hence, these concerns
are overdone.
Equity raising at subsidiary level: Given its equity commitment
over the next 12-18 months, we believe that IVRCL would dilute
its stake in either IVRCL Assets (IVRAH) or Hindustan Dorr Oliver
and infuse the money in IVRAH for mobilising its captive road
projects. If IVRCL is able to achieve this, it would not only improve
its working capital cycle given that it constitutes ~23% of its order
book, it would also lend a fillip to execution.
Trading at crisis level valuations; opportune to Buy: IVRCL Infra
is trading at valuations of 0.9x on P/BV on one year forward
basis which is very attractive considering that even post the
Lehman crisis (October 2008) the stock has been trading in the
range of 0.8-1.2x. Further, the economy is also in much better
shape in comparison to those times. Hence, we believe such
valuations are unwarranted.
On the PE parameter as well the stock is trading at very attractive
multiples. At the CMP of `74 the stock is trading at 7.8x and
4.2x to its FY2102E earnings without and with adjusting for
embedded value, respectively.
To conclude, the stock appears attractive on valuation screen
given it is trading at deep discount to its intrinsic value and we
believe that downside from current levels is capped. Hence, we
recommend Buy on the stock with a target price of `129.
Further, it's should be noted that our SOTP target price factors in
IVRCL Assets on Mcap basis which is trading at 0.5x PB basis
(FY2010) and further we have assigned 25% holding company
discount. Therefore, we believe that this limits downside to our
SOTP due to reduction in embedded values.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IVRCL at par with peers on revenue visibility front: IVRCL has an
order book of ~`23,600cr (3.9x FY2011E revenues) of which
~37% (`5,300cr captive orders + `3,540cr AP orders) is
considered slow moving and markets are concerned over the
same. However, we believe that excluding these orders also
IVRCL's order book position is decent (refer exhibit below) at
`14,760cr (~2.4x FY2011E revenues). Hence, these concerns
are overdone.
Equity raising at subsidiary level: Given its equity commitment
over the next 12-18 months, we believe that IVRCL would dilute
its stake in either IVRCL Assets (IVRAH) or Hindustan Dorr Oliver
and infuse the money in IVRAH for mobilising its captive road
projects. If IVRCL is able to achieve this, it would not only improve
its working capital cycle given that it constitutes ~23% of its order
book, it would also lend a fillip to execution.
Trading at crisis level valuations; opportune to Buy: IVRCL Infra
is trading at valuations of 0.9x on P/BV on one year forward
basis which is very attractive considering that even post the
Lehman crisis (October 2008) the stock has been trading in the
range of 0.8-1.2x. Further, the economy is also in much better
shape in comparison to those times. Hence, we believe such
valuations are unwarranted.
On the PE parameter as well the stock is trading at very attractive
multiples. At the CMP of `74 the stock is trading at 7.8x and
4.2x to its FY2102E earnings without and with adjusting for
embedded value, respectively.
To conclude, the stock appears attractive on valuation screen
given it is trading at deep discount to its intrinsic value and we
believe that downside from current levels is capped. Hence, we
recommend Buy on the stock with a target price of `129.
Further, it's should be noted that our SOTP target price factors in
IVRCL Assets on Mcap basis which is trading at 0.5x PB basis
(FY2010) and further we have assigned 25% holding company
discount. Therefore, we believe that this limits downside to our
SOTP due to reduction in embedded values.
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