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IVRCL Infrastructures:: Execution starts picking up…
IVRCL’s Q3FY11 results came marginally below our expectations largely
due to a sharp jump in interest expenses. On the positive side,
execution has started picking up with 14% revenue growth in Q3FY11
while the EBITDA margin came at 9.4% despite provisioning of | 12
crore associated with long dated claims. The order book was healthy at
| 24,200 crore and captive order book accounts for ~25% in the current
order book. The pick-up in execution of captive BOT orders (three
projects got financial closure [FC] and three would be done in some
time) holds the key for FY12 revenue growth. We recommend a BUY
rating with a price target of | 84.
Q3FY11 results marginally below expectation
IVRCL’s revenues grew 14.5% YoY to | 1, 410.4 crore (our estimate: |
1,449.1 crore). Despite a provision of | 12 crore towards long dated
claims, the EBITDA margin came at 9.4%. The PAT at | 42.3 crore was
marginally lower than our expectation of | 46.5 crore due to higher
interest cost (| 59.2 crore in Q3FY11 vs. | 48 crore in Q2FY11). With
revenue booking of | 3566 crore in 9MFY11, the management has
toned down its guidance to | 6250 crore from | 6,500 crore guided
earlier. However, the revised guidance still implies revenue growth of
~42% in Q4FY11, which is pretty difficult in our view.
Order book - | 24,200 crore, execution on captive orders to pick up
IVRCL’s order book stands at ~ | 24,000 crore with TTM order book to
bill ratio at 4.4x. Captive BOT orders account for ~| 6000 crore (25%).
In terms of BOT projects, IVRCL has done FC for three captive BOT
projects (Baramati Phaltan, Indore Gujarat, Chengapali - Walayar) and is
looking to do FC for three more projects (Goa-Karnataka, Sion Panvel
and Karanji Chandrapur) in the near future. The pick-up in execution of
these projects holds the key for IVRCL’s FY12revenue growth.
Valuation
We have cut our FY11 and FY12 EPS estimates in order to incorporate
slower than expected execution and rising interest outgo. At the CMP,
the stock is quoting at 5.8x FY12 adjusted PE and 0.9x FY12 P/BV. We
recommend a BUY rating on the stock with a price target of | 84/share.
Healthy order book maintained
IVRCL has secured orders worth | 7,500 crore in 9MFY11 in the
water infrastructure, water transmission and hydroelectric segments
The healthy order book of the company of ~| 24,000 crore
(including L1 orders worth | 2,000 crore) provides strong revenue
visibility with a TTM order book-to-bill ratio of 4.4x
Going forward, IVRCL has guided to close the FY11 order book at |
24,000-25,000 crore
The exposure to the slow moving AP region has come down to
~13% in the current order book from ~15-16% in the previous
quarters. The receivable from the AP region stands at | 51 crore
The water segment dominates the order book with ~46% share,
followed by the transportation (~27%), buildings (~20%) and power
(~7%) segments
Debt-equity remains high
At the end of Q3FY11, the gross debt of IVRCL stood at | 2,200
crore with net debt/equity ratio of 1.1x (vs. 0.8x in FY10). The net
current assets stand at | 2450 crore (including advances to
subsidiary of | 450 crore)
IVR Assets needs to arrange | 700 crore as equity out of total
requirement of | 1,350 crore
Out of the total | 1350 crore equity required by IVR Assets, it has
managed to raise | 400 crore (| 150 crore from Ascent through QIP and
| 250 crore from IFCI through compulsorily convertible debenture
[CCD]). Furthermore, the company is also in talks to raise | 250 crore
through CCD for its operational assets. Hence, IVR Assets is required to
arrange an additional | 700 crore as equity over the next two years. In
terms of FC for new BOT projects, IVRCL has done FC for three captive
BOT projects (Baramati Phaltan, Indore Gujarat, Chengapali - Walayar)
and is looking to do FC for three more projects (Goa-Karnataka, Sion
Panvel and Karanji Chandrapur) in the near future.
Other highlights
IVRCLAH reported a topline of ~| 192 crore in Q3FY11 (vs. | 24.3
crore in Q3FY10)
Toll collection from three operational projects stands at | 25- 27 lakh
per day
Hindustan Dorr-Oliver (HDO) reported a turnover of | 254 crore in
Q3FY11 (vs. | 212 crore in Q3FY10) with PAT increasing from | 14.3
crore to | 15.2 crore in the same period
During the quarter, IVRCL also had plot sales at AP (106 plots were
sold out of 240 units launched in Q3FY11)
Valuations
Given the slower than expected execution, interest expenses rose on
account of rising WC requirement. We have cut our FY11/FY12 EPS
estimates by 11%/24.4%, respectively. We now expect IVRCL’s net profit
to remain largely flat till FY12 as the growth in revenues is expected to be
offset by rising interest expenses. However, we recommend a BUY rating
on the stock only on account cheap valuations. At the CMP, the stock is
quoting at 5.8x FY12 adjusted PE and 0.9x FY12 P/BV. We have valued
IVRCL at | 84/ share. The construction business is valued at | 54/ share
(we have lowered our target P/E multiple to 7.5x FY12 EPS from 11x
earlier on account of no growth in earnings during FY10-FY12. IVRCL’s
stake in HDO and IVR Assets is valued at a 30% discount to their current
market cap contributing | 30/ share to our valuation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IVRCL Infrastructures:: Execution starts picking up…
IVRCL’s Q3FY11 results came marginally below our expectations largely
due to a sharp jump in interest expenses. On the positive side,
execution has started picking up with 14% revenue growth in Q3FY11
while the EBITDA margin came at 9.4% despite provisioning of | 12
crore associated with long dated claims. The order book was healthy at
| 24,200 crore and captive order book accounts for ~25% in the current
order book. The pick-up in execution of captive BOT orders (three
projects got financial closure [FC] and three would be done in some
time) holds the key for FY12 revenue growth. We recommend a BUY
rating with a price target of | 84.
Q3FY11 results marginally below expectation
IVRCL’s revenues grew 14.5% YoY to | 1, 410.4 crore (our estimate: |
1,449.1 crore). Despite a provision of | 12 crore towards long dated
claims, the EBITDA margin came at 9.4%. The PAT at | 42.3 crore was
marginally lower than our expectation of | 46.5 crore due to higher
interest cost (| 59.2 crore in Q3FY11 vs. | 48 crore in Q2FY11). With
revenue booking of | 3566 crore in 9MFY11, the management has
toned down its guidance to | 6250 crore from | 6,500 crore guided
earlier. However, the revised guidance still implies revenue growth of
~42% in Q4FY11, which is pretty difficult in our view.
Order book - | 24,200 crore, execution on captive orders to pick up
IVRCL’s order book stands at ~ | 24,000 crore with TTM order book to
bill ratio at 4.4x. Captive BOT orders account for ~| 6000 crore (25%).
In terms of BOT projects, IVRCL has done FC for three captive BOT
projects (Baramati Phaltan, Indore Gujarat, Chengapali - Walayar) and is
looking to do FC for three more projects (Goa-Karnataka, Sion Panvel
and Karanji Chandrapur) in the near future. The pick-up in execution of
these projects holds the key for IVRCL’s FY12revenue growth.
Valuation
We have cut our FY11 and FY12 EPS estimates in order to incorporate
slower than expected execution and rising interest outgo. At the CMP,
the stock is quoting at 5.8x FY12 adjusted PE and 0.9x FY12 P/BV. We
recommend a BUY rating on the stock with a price target of | 84/share.
Healthy order book maintained
IVRCL has secured orders worth | 7,500 crore in 9MFY11 in the
water infrastructure, water transmission and hydroelectric segments
The healthy order book of the company of ~| 24,000 crore
(including L1 orders worth | 2,000 crore) provides strong revenue
visibility with a TTM order book-to-bill ratio of 4.4x
Going forward, IVRCL has guided to close the FY11 order book at |
24,000-25,000 crore
The exposure to the slow moving AP region has come down to
~13% in the current order book from ~15-16% in the previous
quarters. The receivable from the AP region stands at | 51 crore
The water segment dominates the order book with ~46% share,
followed by the transportation (~27%), buildings (~20%) and power
(~7%) segments
Debt-equity remains high
At the end of Q3FY11, the gross debt of IVRCL stood at | 2,200
crore with net debt/equity ratio of 1.1x (vs. 0.8x in FY10). The net
current assets stand at | 2450 crore (including advances to
subsidiary of | 450 crore)
IVR Assets needs to arrange | 700 crore as equity out of total
requirement of | 1,350 crore
Out of the total | 1350 crore equity required by IVR Assets, it has
managed to raise | 400 crore (| 150 crore from Ascent through QIP and
| 250 crore from IFCI through compulsorily convertible debenture
[CCD]). Furthermore, the company is also in talks to raise | 250 crore
through CCD for its operational assets. Hence, IVR Assets is required to
arrange an additional | 700 crore as equity over the next two years. In
terms of FC for new BOT projects, IVRCL has done FC for three captive
BOT projects (Baramati Phaltan, Indore Gujarat, Chengapali - Walayar)
and is looking to do FC for three more projects (Goa-Karnataka, Sion
Panvel and Karanji Chandrapur) in the near future.
Other highlights
IVRCLAH reported a topline of ~| 192 crore in Q3FY11 (vs. | 24.3
crore in Q3FY10)
Toll collection from three operational projects stands at | 25- 27 lakh
per day
Hindustan Dorr-Oliver (HDO) reported a turnover of | 254 crore in
Q3FY11 (vs. | 212 crore in Q3FY10) with PAT increasing from | 14.3
crore to | 15.2 crore in the same period
During the quarter, IVRCL also had plot sales at AP (106 plots were
sold out of 240 units launched in Q3FY11)
Valuations
Given the slower than expected execution, interest expenses rose on
account of rising WC requirement. We have cut our FY11/FY12 EPS
estimates by 11%/24.4%, respectively. We now expect IVRCL’s net profit
to remain largely flat till FY12 as the growth in revenues is expected to be
offset by rising interest expenses. However, we recommend a BUY rating
on the stock only on account cheap valuations. At the CMP, the stock is
quoting at 5.8x FY12 adjusted PE and 0.9x FY12 P/BV. We have valued
IVRCL at | 84/ share. The construction business is valued at | 54/ share
(we have lowered our target P/E multiple to 7.5x FY12 EPS from 11x
earlier on account of no growth in earnings during FY10-FY12. IVRCL’s
stake in HDO and IVR Assets is valued at a 30% discount to their current
market cap contributing | 30/ share to our valuation.
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