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Reliance Infrastructure (Price Rs. 637 (as on Feb 16 ), TP Rs. 902, ER
41.6%, EDY 1.3%, 1H) : Maintain Buy; Cutting our Target Price to Rs902
§ Consolidated PAT does okay but standalone PAT
disappoints — Despite R-Infra’s 3QFY11 consolidated sales growing only
14% YoY, EBITDA at Rs5.5bn was up 31% YoY on account of a 195bps
margin expansion. However, higher interest, lower other income and
higher tax rates implied PAT was flat YoY. Standalone 3QFY11 PAT at
Rs1.7bn was down 39% YoY and 41% below CIRA forecasts.
§ Maintain Buy; but raising to High Risk — We
maintain our Buy rating on the stock given its discount to parent book
value of Rs641/share (Dec10), a significant discount to the
consolidated book value of Rs903/share (Dec10) and it has
underperformed the BSE Sensex by 52% over the past year. However, we
raise the risk rating to High from Medium given: 1) recent volatility
in the stock, and 2) SEBI’s consent order on R-Infra and RNRL.
§ Cutting target price to Rs902 — We reduce it
from Rs1367 earlier to factor in: 1) 20-37% EPS cut; 2) lowering our
parent EV/EBITDA multiple to 6x (from 7x earlier) to factor in
de-rating in the power and construction sectors; 3) 50% discount to
our cash equivalents number given questions on the accounting of the
same, post the SEBI consent order; 4) 25% discount on NAV of the
infrastructure assets to factor in de-rating in the infra sector; and
5) R-Power is at 20% discount to market price of Rs120 (Rs160 earlier)
§ 22.6mn promoter warrants converted at
Rs929/share — The board had in July09 allotted 42.9mn warrants to
promoters at Rs929/share. Of these, 22.6 mn warrants worth US$469mn
have been converted in Jan11.
§ Share buyback up to Rs10bn @ max price of
Rs725 — To 1) reduce short-term volatility in the company's share
price; 2) deter speculative activity in the company's shares; 3) send
a strong signal on the perceived under-valuation; and 4) reiterate
management confidence in future growth prospects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Infrastructure (Price Rs. 637 (as on Feb 16 ), TP Rs. 902, ER
41.6%, EDY 1.3%, 1H) : Maintain Buy; Cutting our Target Price to Rs902
§ Consolidated PAT does okay but standalone PAT
disappoints — Despite R-Infra’s 3QFY11 consolidated sales growing only
14% YoY, EBITDA at Rs5.5bn was up 31% YoY on account of a 195bps
margin expansion. However, higher interest, lower other income and
higher tax rates implied PAT was flat YoY. Standalone 3QFY11 PAT at
Rs1.7bn was down 39% YoY and 41% below CIRA forecasts.
§ Maintain Buy; but raising to High Risk — We
maintain our Buy rating on the stock given its discount to parent book
value of Rs641/share (Dec10), a significant discount to the
consolidated book value of Rs903/share (Dec10) and it has
underperformed the BSE Sensex by 52% over the past year. However, we
raise the risk rating to High from Medium given: 1) recent volatility
in the stock, and 2) SEBI’s consent order on R-Infra and RNRL.
§ Cutting target price to Rs902 — We reduce it
from Rs1367 earlier to factor in: 1) 20-37% EPS cut; 2) lowering our
parent EV/EBITDA multiple to 6x (from 7x earlier) to factor in
de-rating in the power and construction sectors; 3) 50% discount to
our cash equivalents number given questions on the accounting of the
same, post the SEBI consent order; 4) 25% discount on NAV of the
infrastructure assets to factor in de-rating in the infra sector; and
5) R-Power is at 20% discount to market price of Rs120 (Rs160 earlier)
§ 22.6mn promoter warrants converted at
Rs929/share — The board had in July09 allotted 42.9mn warrants to
promoters at Rs929/share. Of these, 22.6 mn warrants worth US$469mn
have been converted in Jan11.
§ Share buyback up to Rs10bn @ max price of
Rs725 — To 1) reduce short-term volatility in the company's share
price; 2) deter speculative activity in the company's shares; 3) send
a strong signal on the perceived under-valuation; and 4) reiterate
management confidence in future growth prospects.
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