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IRB Infrastructure (IRB)
Infrastructure
Strong construction, positive early data from Tumkur are key positives. Strong
1QFY12 numbers (revenue up 56%, 41% EBITDA, PAT up 14%) was led by revenue and
margin outperformance of construction business (revenues up 84% yoy, EBITDA margin
of 22%). We believe that early toll collection data (Rs4.4 mn/day) from Tumkur project
may carry positive surprise and thus establish value accretion. Toll collections for Bharuch-
Surat pick up while Mumbai-Pune and Surat-Dahisar still remain below par. Retain ADD.
Tumkur project may carry positive surprise; collections pick up in Bharuch-Surat project
IRB reported a strong growth in toll collection revenues to Rs2.8 bn in 1QFY12, up 18.7% yoy led
by (1) start of toll collections for Tumkur-Chitradurga project in June 2011 and (2) 18% toll-rate
hike in the Mumbai-Pune Expressway project (adjusted toll revenue growth of about 7-7.5%).
Tumkur-Chitradurga toll collections of Rs4.4/day; may carry positive surprise to value.
Toll collections of Rs114 mn imply a per-day collection of about Rs4.4 mn - may carry positive
surprise with FY2012 annual collection of Rs1.66 bn (our estimate of Rs1.5 bn) and thus
establish value accretion
Bharuch-Surat toll collections pick up while Mumbai-Pune and Surat-Dahisar still
remain below par. While Bharuch-Surat toll collections picked up (growth of 12.8% yoy) toll
collection for Mumbai-Pune (adjusted for 18% tariff hike traffic growth of 4.2% yoy) and
Surat-Dahisar (toll collection growth of 6.8%) still remains below par.
Construction business surprises positively on revenues as well as margin front
Construction revenues recorded a strong growth of 84% yoy, 28.7% ahead of estimates, to Rs5.7
bn from Rs3.1 bn in 1QFY11. The strong growth was led by start of construction of Pathankot-
Amritsar, Talegaon-Amravati, and Jaipur-Deoli projects (started construction post 1QFY11). Build
full-year construction revenues of Rs23.5 bn in FY2012 (from Rs16.4 in FY2011). Construction
segment also delivered EBITDA margin outperformance at 22% versus our expectation of 20%.
Revenues of Rs8 bn (up 56.5% yoy), 41% EBITDA margin, net PBT of Rs1.4 bn, up 12% yoy
IRB reported strong revenues of Rs8 bn, up 56.5% yoy on higher-than-expected construction
revenues with EBITDA margin of 41%. High interest cost (likely on increased project debt; net debt
of Rs38.6 bn vs Rs24 bn at end-FY2010) led to a net PAT growth of about 14% yoy to Rs1.35 bn.
Revise estimates; reiterate ADD with a revised TP of Rs230 on roll over to FY2013E-based valuation
Revise consolidated estimates to Rs11.7 and Rs13.4 from (Rs10.3 and Rs12.2) for FY2012E and
FY2013E. Reiterate ADD with a revised TP of Rs230/share (from Rs200 on roll over to FY2013E).
Strong revenues led by construction segment; margins broadly in line
IRB reported strong 1QFY12 revenues of Rs8 bn recording a strong 56.5% yoy growth and
about 19% higher than our estimate of Rs6.7 bn. The revenue outperformance was
primarily led by higher-than-expected construction revenues (of Rs5.7 bn versus expectation
of Rs4.4 bn). EBITDA margin at 41% was relatively flat on a sequential basis and about 200
bps below our estimate of 43% (on higher proportion of construction revenues - margins
lower than BOT toll business). Higher interest cost (likely on increased debt levels) led to a
net PBT growth of about 19% yoy to Rs1.8 bn. IRB reported a consolidated net PAT of
Rs1.36 bn, up 12% yoy from Rs1.2 bn in 1QFY11.
Yoy doubling of interest cost likely on higher debt levels
IRB reported higher interest costs of Rs1.2 bn in 1QFY12 versus only about Rs661 mn in
1QFY11 (our estimate of Rs1.06 bn). The higher interest cost was likely on the back of
increased project debt in projects such as Surat-Dahisar etc. (interest cost is not capitalized
as the revenues have started). IRB reported a net debt of Rs38.6 bn at end-1QFY12 versus
net debt level of about Rs24 bn at end-FY2010 (and about Rs27 bn at end-1QFY10).
Strong construction revenues of Rs5.7 bn lead revenue outperformance
The consolidated revenue outperformance in 1QFY12 (versus estimates) was almost entirely
led by stronger-than-expected construction revenues (toll collection revenues broadly in line).
Construction revenues recorded a strong growth of 84% yoy, 28.7% ahead of estimates, to
Rs5.7 bn from Rs3.1 bn in 1QFY11 (relatively flat on a sequential basis). The strong growth
was likely led by start of construction of (1) Pathankot-Amritsar project (started construction
in 4QFY11), (2) Talegaon-Amravati project (started construction in 3QFY11), and (3) Jaipur-
Deoli project (started construction in 2QFY11). Construction segment also delivered margin
outperformance with 22% EBITDA margins in 1QFY12 versus our expectation of 20%. We
increase our construction segment revenue estimates to Rs23.5 bn in FY2012 versus about
Rs16.4 bn reported in FY2011.
Tumkur-Chitradurga revenues imply toll collections of Rs4.2/day; may carry positive
surprise to value
IRB announced the start of concession agreement of the Tumkur-Chitradurga road project
on June 4, 2011 (about 26 days of toll collections in this quarter). This project contributed
about Rs114 mn to IRB’s total toll collection revenues in 1QFY12 implying a per-day
collection of about Rs4.4 mn. The project may carry positive surprise with FY2012 annual
collection of about Rs1.6 bn versus our estimate of Rs1.5 bn (based on initial data) and thus
establish value accretion.
Bharuch-Surat toll collections pick up while Mumbai-Pune and Surat-Dahisar still
remain below par
While Bharuch-Surat toll collections picked up in 1QFY12, toll collections across the other
two key stretches viz. Mumbai-Pune (adjusted for 18% tariff hike) and Surat-Dahisar still
remains below par. Toll collections for key stretches were as follows:
Mumbai-Pune. Toll collections at Mumbai-Pune increased by 23% yoy. Adjusting for the
18% toll rate hike (from April 1, 2011), this implies that traffic growth for the project
remained stuck around the 5% mark (in fact reaching sub-5% range) at about 4.2%
Surat-Dahisar. This project reported toll collections of Rs942 mn, up 6.8% yoy. This
implies an average per day toll collection of Rs10.4 mn versus about Rs9.7 mn in 1QFY11.
Assuming a 5% increase in toll rate (in September 2010), the toll collections imply a
traffic growth of just 1.7% yoy in 1QFY12.
Bharuch-Surat. This project recorded a pick up in toll collections, up 12.8% yoy to Rs336
mn in 1QFY12 implying daily collection of Rs3.7 mn/day versus Rs3.3 mn/day in 1QFY11.
This is broadly in line with our base case expectation of inflation + traffic growth of at
least 12-13% in NHAI projects.
Reiterate ADD with a revised TP of Rs230 (on roll-over to March 2013E valuation)
We have revised our consolidated estimates to Rs11.7 and Rs13.4 from Rs10.3 and Rs12.2
for FY2012E and FY2013E, respectively on higher construction business revenues. We retain
our ADD rating on the stock with a revised SOTP-based target price to Rs230/share (from
Rs200/share earlier) based on roll-over to FY2013E-based valuation (form March-12E-based
earlier). Our target price of Rs230/share is composed of (1) March-13 based FCFE of projects
– Rs179/share, (2) Construction value – Rs41/share based on NPV of cash flows till FY2015E,
and (3) Rs10 from net cash on standalone balance sheet (at end-FY2011).
Lower-than-expected traffic growth & base traffic is key risk
Lower-than-expected traffic growth and base-year traffic assumption remains the key risk to
the value of BOT projects. A 1% lower traffic growth assumption for the full period of the
concession period results in 27% lower value for road projects versus our target value and a
15% impact on our target price.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IRB Infrastructure (IRB)
Infrastructure
Strong construction, positive early data from Tumkur are key positives. Strong
1QFY12 numbers (revenue up 56%, 41% EBITDA, PAT up 14%) was led by revenue and
margin outperformance of construction business (revenues up 84% yoy, EBITDA margin
of 22%). We believe that early toll collection data (Rs4.4 mn/day) from Tumkur project
may carry positive surprise and thus establish value accretion. Toll collections for Bharuch-
Surat pick up while Mumbai-Pune and Surat-Dahisar still remain below par. Retain ADD.
Tumkur project may carry positive surprise; collections pick up in Bharuch-Surat project
IRB reported a strong growth in toll collection revenues to Rs2.8 bn in 1QFY12, up 18.7% yoy led
by (1) start of toll collections for Tumkur-Chitradurga project in June 2011 and (2) 18% toll-rate
hike in the Mumbai-Pune Expressway project (adjusted toll revenue growth of about 7-7.5%).
Tumkur-Chitradurga toll collections of Rs4.4/day; may carry positive surprise to value.
Toll collections of Rs114 mn imply a per-day collection of about Rs4.4 mn - may carry positive
surprise with FY2012 annual collection of Rs1.66 bn (our estimate of Rs1.5 bn) and thus
establish value accretion
Bharuch-Surat toll collections pick up while Mumbai-Pune and Surat-Dahisar still
remain below par. While Bharuch-Surat toll collections picked up (growth of 12.8% yoy) toll
collection for Mumbai-Pune (adjusted for 18% tariff hike traffic growth of 4.2% yoy) and
Surat-Dahisar (toll collection growth of 6.8%) still remains below par.
Construction business surprises positively on revenues as well as margin front
Construction revenues recorded a strong growth of 84% yoy, 28.7% ahead of estimates, to Rs5.7
bn from Rs3.1 bn in 1QFY11. The strong growth was led by start of construction of Pathankot-
Amritsar, Talegaon-Amravati, and Jaipur-Deoli projects (started construction post 1QFY11). Build
full-year construction revenues of Rs23.5 bn in FY2012 (from Rs16.4 in FY2011). Construction
segment also delivered EBITDA margin outperformance at 22% versus our expectation of 20%.
Revenues of Rs8 bn (up 56.5% yoy), 41% EBITDA margin, net PBT of Rs1.4 bn, up 12% yoy
IRB reported strong revenues of Rs8 bn, up 56.5% yoy on higher-than-expected construction
revenues with EBITDA margin of 41%. High interest cost (likely on increased project debt; net debt
of Rs38.6 bn vs Rs24 bn at end-FY2010) led to a net PAT growth of about 14% yoy to Rs1.35 bn.
Revise estimates; reiterate ADD with a revised TP of Rs230 on roll over to FY2013E-based valuation
Revise consolidated estimates to Rs11.7 and Rs13.4 from (Rs10.3 and Rs12.2) for FY2012E and
FY2013E. Reiterate ADD with a revised TP of Rs230/share (from Rs200 on roll over to FY2013E).
Strong revenues led by construction segment; margins broadly in line
IRB reported strong 1QFY12 revenues of Rs8 bn recording a strong 56.5% yoy growth and
about 19% higher than our estimate of Rs6.7 bn. The revenue outperformance was
primarily led by higher-than-expected construction revenues (of Rs5.7 bn versus expectation
of Rs4.4 bn). EBITDA margin at 41% was relatively flat on a sequential basis and about 200
bps below our estimate of 43% (on higher proportion of construction revenues - margins
lower than BOT toll business). Higher interest cost (likely on increased debt levels) led to a
net PBT growth of about 19% yoy to Rs1.8 bn. IRB reported a consolidated net PAT of
Rs1.36 bn, up 12% yoy from Rs1.2 bn in 1QFY11.
Yoy doubling of interest cost likely on higher debt levels
IRB reported higher interest costs of Rs1.2 bn in 1QFY12 versus only about Rs661 mn in
1QFY11 (our estimate of Rs1.06 bn). The higher interest cost was likely on the back of
increased project debt in projects such as Surat-Dahisar etc. (interest cost is not capitalized
as the revenues have started). IRB reported a net debt of Rs38.6 bn at end-1QFY12 versus
net debt level of about Rs24 bn at end-FY2010 (and about Rs27 bn at end-1QFY10).
Strong construction revenues of Rs5.7 bn lead revenue outperformance
The consolidated revenue outperformance in 1QFY12 (versus estimates) was almost entirely
led by stronger-than-expected construction revenues (toll collection revenues broadly in line).
Construction revenues recorded a strong growth of 84% yoy, 28.7% ahead of estimates, to
Rs5.7 bn from Rs3.1 bn in 1QFY11 (relatively flat on a sequential basis). The strong growth
was likely led by start of construction of (1) Pathankot-Amritsar project (started construction
in 4QFY11), (2) Talegaon-Amravati project (started construction in 3QFY11), and (3) Jaipur-
Deoli project (started construction in 2QFY11). Construction segment also delivered margin
outperformance with 22% EBITDA margins in 1QFY12 versus our expectation of 20%. We
increase our construction segment revenue estimates to Rs23.5 bn in FY2012 versus about
Rs16.4 bn reported in FY2011.
Tumkur-Chitradurga revenues imply toll collections of Rs4.2/day; may carry positive
surprise to value
IRB announced the start of concession agreement of the Tumkur-Chitradurga road project
on June 4, 2011 (about 26 days of toll collections in this quarter). This project contributed
about Rs114 mn to IRB’s total toll collection revenues in 1QFY12 implying a per-day
collection of about Rs4.4 mn. The project may carry positive surprise with FY2012 annual
collection of about Rs1.6 bn versus our estimate of Rs1.5 bn (based on initial data) and thus
establish value accretion.
Bharuch-Surat toll collections pick up while Mumbai-Pune and Surat-Dahisar still
remain below par
While Bharuch-Surat toll collections picked up in 1QFY12, toll collections across the other
two key stretches viz. Mumbai-Pune (adjusted for 18% tariff hike) and Surat-Dahisar still
remains below par. Toll collections for key stretches were as follows:
Mumbai-Pune. Toll collections at Mumbai-Pune increased by 23% yoy. Adjusting for the
18% toll rate hike (from April 1, 2011), this implies that traffic growth for the project
remained stuck around the 5% mark (in fact reaching sub-5% range) at about 4.2%
Surat-Dahisar. This project reported toll collections of Rs942 mn, up 6.8% yoy. This
implies an average per day toll collection of Rs10.4 mn versus about Rs9.7 mn in 1QFY11.
Assuming a 5% increase in toll rate (in September 2010), the toll collections imply a
traffic growth of just 1.7% yoy in 1QFY12.
Bharuch-Surat. This project recorded a pick up in toll collections, up 12.8% yoy to Rs336
mn in 1QFY12 implying daily collection of Rs3.7 mn/day versus Rs3.3 mn/day in 1QFY11.
This is broadly in line with our base case expectation of inflation + traffic growth of at
least 12-13% in NHAI projects.
Reiterate ADD with a revised TP of Rs230 (on roll-over to March 2013E valuation)
We have revised our consolidated estimates to Rs11.7 and Rs13.4 from Rs10.3 and Rs12.2
for FY2012E and FY2013E, respectively on higher construction business revenues. We retain
our ADD rating on the stock with a revised SOTP-based target price to Rs230/share (from
Rs200/share earlier) based on roll-over to FY2013E-based valuation (form March-12E-based
earlier). Our target price of Rs230/share is composed of (1) March-13 based FCFE of projects
– Rs179/share, (2) Construction value – Rs41/share based on NPV of cash flows till FY2015E,
and (3) Rs10 from net cash on standalone balance sheet (at end-FY2011).
Lower-than-expected traffic growth & base traffic is key risk
Lower-than-expected traffic growth and base-year traffic assumption remains the key risk to
the value of BOT projects. A 1% lower traffic growth assumption for the full period of the
concession period results in 27% lower value for road projects versus our target value and a
15% impact on our target price.
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