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India Equity Research Reports, IPO and Stock News
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IRB INFRASTRUCTURE DEVELOPERS
TARGET PRICE: Rs. 246
RECOMMENDATION: BUY
INVESTMENT RATIONALE
Experienced player in road BOT segment and likely to benefit from upcoming
project awards in road segment
Strong order book of Rs 117 bn to drive growth in revenues at a CAGR of 36%
between FY11-FY13
Company reported excellent numbers for Q1FY12 with revenues growing by
55%, strong operating margins of 43.1% and net profit growth of 14% YoY.
Growth in revenues and profits was led by 18% toll rate hike in Mumbai-Pune
BOT project as well as improvement in execution of EPC projects.
We expect margins to decline going ahead in comparison with FY11 due to
higher proportion of EPC revenues. But company has sufficient cushion to
hedge against high commodity prices. We expect margins to be 44.1% and 37%
for FY12 and FY13 respectively for the company.
Toll collections in BOT subsidiaries are likely to improve in line with WPI as well
as traffic growth going forward
With a strong order book and expected increase in toll revenues going forward,
we expect revenues to grow at a CAGR of 36% and net profits to grow at a
CAGR of 17% between FY11-FY13.
We value the company on SOTP and arrive at a target price of Rs 246 on FY12
estimates. We continue to recommend BUY on the stock.
RISKS & CONCERNS
Slowdown in traffic growth or increase in interest rates
Delay in project awards from NHAI or any aggressive bidding by the company
can impact project viability
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