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Reliance Infrastructure (RELI)
Utilities
Step-up in execution by construction division. Reliance Infrastructure (RELI) carried
on the momentum of strong execution with the EPC division reporting 3X growth in
revenues—likely aided by a pick-up in implementation of Sasan UMPP and Samalkot
power projects of Reliance Power. We are also encouraged by the improved pace of
execution across the various infrastructure assets and reduction of exposure to the
contentious inter-corporate deposits, though note that concerns on the group’s role in
the telecom spectrum auctions will likely continue to weigh on stock performance.
Robust EPC revenues and margins drive outperformance
RELI reported standalone revenues of Rs37.7 bn (60% yoy, 12% qoq), operating profit of Rs5.3 bn
(55% yoy, 31% qoq) and net income of Rs4.9 bn (191% yoy, 15% qoq) against our estimates of
Rs28.6 bn, Rs2.6 bn and Rs2.5 bn, respectively. Strong operational outperformance was driven by
significantly higher-than-estimated EPC revenues of Rs24.3 bn (against our estimate of Rs14.5 bn)
along with gross margins of 23% against our estimate of 19%. Reported net income was further
boosted by higher-than-estimated other income of Rs2.9 bn against our estimate of Rs2.3 bn. We
discuss key highlights of the result in detail in a subsequent section.
Step-up in infrastructure capex encouraging
RELI reported consolidated net revenues of Rs55.5 bn (37% yoy, 13% qoq), EBITDA of Rs5.2 bn
(-1% yoy, 4% qoq) and PAT of Rs3.6 bn (-11% qoq). We note that incremental earnings on a
consolidated basis were contributed by the Delhi distribution business, four operational road
projects and Delhi Metro project. We are encouraged by a significant step-up in infrastructure
capex which increased from Rs8 bn in FY2010 to Rs63 bn in FY2011 signaling a likely uptick in
execution. Management has guided for commencement of revenue contribution from six
additional road projects, WRSS transmission project and Mumbai Metro I by end-FY2012E.
Maintain rating with a target price of Rs920/share
We maintain our BUY rating and revised target price of Rs920/share (previously Rs920/share). Our
SOTP-based target price comprises—(1) Rs183/share from the existing generation, transmission
and distribution businesses, (2) Rs125/share for the EPC business, (3) Rs280/share for 38% stake in
Reliance Power, (4) Rs55/share as the equity-value of the BOT road projects under-construction,
(5) Rs52/share for equity investment made in the various infrastructure projects and (5) cash and
investible surplus in books of Rs228/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Infrastructure (RELI)
Utilities
Step-up in execution by construction division. Reliance Infrastructure (RELI) carried
on the momentum of strong execution with the EPC division reporting 3X growth in
revenues—likely aided by a pick-up in implementation of Sasan UMPP and Samalkot
power projects of Reliance Power. We are also encouraged by the improved pace of
execution across the various infrastructure assets and reduction of exposure to the
contentious inter-corporate deposits, though note that concerns on the group’s role in
the telecom spectrum auctions will likely continue to weigh on stock performance.
Robust EPC revenues and margins drive outperformance
RELI reported standalone revenues of Rs37.7 bn (60% yoy, 12% qoq), operating profit of Rs5.3 bn
(55% yoy, 31% qoq) and net income of Rs4.9 bn (191% yoy, 15% qoq) against our estimates of
Rs28.6 bn, Rs2.6 bn and Rs2.5 bn, respectively. Strong operational outperformance was driven by
significantly higher-than-estimated EPC revenues of Rs24.3 bn (against our estimate of Rs14.5 bn)
along with gross margins of 23% against our estimate of 19%. Reported net income was further
boosted by higher-than-estimated other income of Rs2.9 bn against our estimate of Rs2.3 bn. We
discuss key highlights of the result in detail in a subsequent section.
Step-up in infrastructure capex encouraging
RELI reported consolidated net revenues of Rs55.5 bn (37% yoy, 13% qoq), EBITDA of Rs5.2 bn
(-1% yoy, 4% qoq) and PAT of Rs3.6 bn (-11% qoq). We note that incremental earnings on a
consolidated basis were contributed by the Delhi distribution business, four operational road
projects and Delhi Metro project. We are encouraged by a significant step-up in infrastructure
capex which increased from Rs8 bn in FY2010 to Rs63 bn in FY2011 signaling a likely uptick in
execution. Management has guided for commencement of revenue contribution from six
additional road projects, WRSS transmission project and Mumbai Metro I by end-FY2012E.
Maintain rating with a target price of Rs920/share
We maintain our BUY rating and revised target price of Rs920/share (previously Rs920/share). Our
SOTP-based target price comprises—(1) Rs183/share from the existing generation, transmission
and distribution businesses, (2) Rs125/share for the EPC business, (3) Rs280/share for 38% stake in
Reliance Power, (4) Rs55/share as the equity-value of the BOT road projects under-construction,
(5) Rs52/share for equity investment made in the various infrastructure projects and (5) cash and
investible surplus in books of Rs228/share.
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