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IRB INFRA: BUY, TP-Rs269 (54% upside)
What’s the theme?
IRB infra is a proxy play on Indian road sector. IRB is amongst the largest BOT operator in India with in
house execution capabilities and currently have 16 BOT projects under portfolio, of which ten are
operational, five under construction and one project is in advance stage of financial closure. IRB is well
positioned to add projects worth $1bn i.e about 4-6 BOT projects per annum without any equity dilution.
What will move the stock?
1) Timely execution of projects under construction will act as a catalyst for stock price.
2) NHAI's order awarding this year was laggard, we expect awarding activity to pick up before end of this
year to achieve its full year target. Hence expect IRB to be major beneficiary of awarding process as IRB
is pre-qualified for projects worth Rs250bn.
3) After the recent stock price correction, the stock is available at a compelling P/BV of 2.3 & 2.0 for FY11E
and FY12E resp and is trading at a PE 10.6x FY12.
Where are we stacked versus consensus?
Our FY11E and FY12E earnings estimates are at Rs14.9 and Rs16.4, which are 3.6% higher and inline
for FY12 consensus estimates. We expect topline growth of 47.6% at Rs 25.2bn for FY11 and 40% at
Rs35.2bn for FY12 vs consensus estimate of 54.1% at Rs26.3bn and 47.9% at Rs38.9bn.
We believe recent stock price correction provides good entry point for long term investors with upside
potential of 54.4% on our SOTP based target price of Rs269 vs consensus target of Rs277.
What will challenge our target price?
1) Lower traffic growth; 2) Slowdown in execution of current orders 3) Any change in government policy
which may adversely affect the current tolling charges.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IRB INFRA: BUY, TP-Rs269 (54% upside)
What’s the theme?
IRB infra is a proxy play on Indian road sector. IRB is amongst the largest BOT operator in India with in
house execution capabilities and currently have 16 BOT projects under portfolio, of which ten are
operational, five under construction and one project is in advance stage of financial closure. IRB is well
positioned to add projects worth $1bn i.e about 4-6 BOT projects per annum without any equity dilution.
What will move the stock?
1) Timely execution of projects under construction will act as a catalyst for stock price.
2) NHAI's order awarding this year was laggard, we expect awarding activity to pick up before end of this
year to achieve its full year target. Hence expect IRB to be major beneficiary of awarding process as IRB
is pre-qualified for projects worth Rs250bn.
3) After the recent stock price correction, the stock is available at a compelling P/BV of 2.3 & 2.0 for FY11E
and FY12E resp and is trading at a PE 10.6x FY12.
Where are we stacked versus consensus?
Our FY11E and FY12E earnings estimates are at Rs14.9 and Rs16.4, which are 3.6% higher and inline
for FY12 consensus estimates. We expect topline growth of 47.6% at Rs 25.2bn for FY11 and 40% at
Rs35.2bn for FY12 vs consensus estimate of 54.1% at Rs26.3bn and 47.9% at Rs38.9bn.
We believe recent stock price correction provides good entry point for long term investors with upside
potential of 54.4% on our SOTP based target price of Rs269 vs consensus target of Rs277.
What will challenge our target price?
1) Lower traffic growth; 2) Slowdown in execution of current orders 3) Any change in government policy
which may adversely affect the current tolling charges.
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