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Reliance Infrastructure Ltd
Neutral; RLIN.BO, RELI IN
Buyback & cheap valuations may support stock, but project execution key to stock performance, maintain N.
Standalone results weak: Reported EBITDA of Rs2.47B (up 4.9% YoY)
was well below our est. of Rs3.5B. Mumbai License Area led the
disappointment at standalone level, reported EBIT of Rs759MM was down
49% YoY, despite the lift on stay in tariffs ~Sep-10. EPC segment EBIT
partly made up for weak regulated business numbers. EBIT was up sharply
(147% YoY) to Rs986MM in Dec-q. Margin improved to 8.6% YoY vs.
7.8% in Sep-q. Reported standalone PAT of Rs1.66B was down 40%
YoY.
Consolidated results better: Consolidated EBITDA of Rs5.6B was up a
healthy 34% YoY in Dec-q. Ex-Mumbai license area, electrical system
EBIT of Rs2.6B was up 108% YoY. We believe this could be on account
of strong performance or one-off in Delhi distribution business, although
mgt did not clarify this in the earnings call.
Another buyback, signals management confidence? RELI board has
approved a buyback aggregating to Rs10B @ Rs725/share (15.5%
premium to CMP), probably signalling management's confidence in
business fundamentals. Also, assuming a buyback happens, promoter
holding may increase to ~50.3% from ~48% currently, as per our
calculation.
Changing estimates and price target: We are changing our FY11 and
FY12 estimates by +15.3% and -6.7% respectively due to changes
previously made in RPWR. We reduce our Dec-11 PT from Rs950 earlier
to Rs845 based on our reduced PT of Rs90/share for RPWR vs.
Rs145/share earlier.
Stock view: At 0.7x FY12E P/B, RELI appears to be cheap compared to
peers. A return of risk appetite and the proposed buyback might support the
stock. However, given our fundamental concerns on the business
(competition in Mumbai distribution, EPC profitability, execution of power
and infra projects) as well as recent question marks over its investment
practices, we maintain Neutral.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Infrastructure Ltd
Neutral; RLIN.BO, RELI IN
Buyback & cheap valuations may support stock, but project execution key to stock performance, maintain N.
Standalone results weak: Reported EBITDA of Rs2.47B (up 4.9% YoY)
was well below our est. of Rs3.5B. Mumbai License Area led the
disappointment at standalone level, reported EBIT of Rs759MM was down
49% YoY, despite the lift on stay in tariffs ~Sep-10. EPC segment EBIT
partly made up for weak regulated business numbers. EBIT was up sharply
(147% YoY) to Rs986MM in Dec-q. Margin improved to 8.6% YoY vs.
7.8% in Sep-q. Reported standalone PAT of Rs1.66B was down 40%
YoY.
Consolidated results better: Consolidated EBITDA of Rs5.6B was up a
healthy 34% YoY in Dec-q. Ex-Mumbai license area, electrical system
EBIT of Rs2.6B was up 108% YoY. We believe this could be on account
of strong performance or one-off in Delhi distribution business, although
mgt did not clarify this in the earnings call.
Another buyback, signals management confidence? RELI board has
approved a buyback aggregating to Rs10B @ Rs725/share (15.5%
premium to CMP), probably signalling management's confidence in
business fundamentals. Also, assuming a buyback happens, promoter
holding may increase to ~50.3% from ~48% currently, as per our
calculation.
Changing estimates and price target: We are changing our FY11 and
FY12 estimates by +15.3% and -6.7% respectively due to changes
previously made in RPWR. We reduce our Dec-11 PT from Rs950 earlier
to Rs845 based on our reduced PT of Rs90/share for RPWR vs.
Rs145/share earlier.
Stock view: At 0.7x FY12E P/B, RELI appears to be cheap compared to
peers. A return of risk appetite and the proposed buyback might support the
stock. However, given our fundamental concerns on the business
(competition in Mumbai distribution, EPC profitability, execution of power
and infra projects) as well as recent question marks over its investment
practices, we maintain Neutral.
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