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IL&FS Transportation (XTPSF, Buy)
Bear case: What can go wrong?
Decline in the toll revenues owing to (a) fall in traffic volume. Assumed 100
bps fall in traffic growth rate and (b) fall in WPI inflation. Assumed 100bps fall
in inflation, to lower toll escalation.
Given the continuing high competitive intensity to win new projects from
NHAI, in the bear case, we estimate new order inflow to drop by Rs10bn i.e.
by 33% in FY12E and 29% in FY13E.
Fall in E&C margin by 100bps
Higher interest rate by 50bps. Leverage is high as ITNL has 8 annuity
projects (25% of portfolio lane length by FY14E) with no revenue risk (as
revenue is assured from NHAI) wherein D:E is as high as 90:10.
Consequently, we estimate an earnings decline of 14% in FY13E to Rs5.3bn
(amongst the lowest % decline vs peers).
Base case: Well positioned in infra sector
We estimate a 70% jump in the road portfolio over FY12-14E from 1,500km
at present to 2,550 km by FY14E. Accordingly, average BOT revenue would
go up from Rs10mn/day in FY11 to Rs29mn/day by FY14E.
Judicious mix of annuity / toll roads (10 operating – 7 toll, 3 annuity; 10
construction – 5 toll, 5 annuity). Annuity + toll auctioning improves revenue
visibility. E&C o/bk at Rs89bn (1.75x FY12E sales) would drive earnings.
New order inflow lowered by 20-25% over FY12-14E. Cut earnings to
Rs6.2bn in FY13E (4% cut). Lower PO to Rs248 (vs Rs257 earlier).
Risk-reward: Favourable
In the bear case, we expect the stock to trade at Rs162/share (P/BV of 1x
FY13E and P/E 5x FY13E – amongst the cheapest vs peers). In the base
case, we expect the stock to trade at Rs248/share (P/BV of 1.5xFY13E).
Overall, the risk-reward appears favourable on strong in-house execution
capabilities, no pledging, amongst the highest RoE of 19%/21% in FY12/13E
vs peers and an assumption the company will bid on low IRR to bag new
projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IL&FS Transportation (XTPSF, Buy)
Bear case: What can go wrong?
Decline in the toll revenues owing to (a) fall in traffic volume. Assumed 100
bps fall in traffic growth rate and (b) fall in WPI inflation. Assumed 100bps fall
in inflation, to lower toll escalation.
Given the continuing high competitive intensity to win new projects from
NHAI, in the bear case, we estimate new order inflow to drop by Rs10bn i.e.
by 33% in FY12E and 29% in FY13E.
Fall in E&C margin by 100bps
Higher interest rate by 50bps. Leverage is high as ITNL has 8 annuity
projects (25% of portfolio lane length by FY14E) with no revenue risk (as
revenue is assured from NHAI) wherein D:E is as high as 90:10.
Consequently, we estimate an earnings decline of 14% in FY13E to Rs5.3bn
(amongst the lowest % decline vs peers).
Base case: Well positioned in infra sector
We estimate a 70% jump in the road portfolio over FY12-14E from 1,500km
at present to 2,550 km by FY14E. Accordingly, average BOT revenue would
go up from Rs10mn/day in FY11 to Rs29mn/day by FY14E.
Judicious mix of annuity / toll roads (10 operating – 7 toll, 3 annuity; 10
construction – 5 toll, 5 annuity). Annuity + toll auctioning improves revenue
visibility. E&C o/bk at Rs89bn (1.75x FY12E sales) would drive earnings.
New order inflow lowered by 20-25% over FY12-14E. Cut earnings to
Rs6.2bn in FY13E (4% cut). Lower PO to Rs248 (vs Rs257 earlier).
Risk-reward: Favourable
In the bear case, we expect the stock to trade at Rs162/share (P/BV of 1x
FY13E and P/E 5x FY13E – amongst the cheapest vs peers). In the base
case, we expect the stock to trade at Rs248/share (P/BV of 1.5xFY13E).
Overall, the risk-reward appears favourable on strong in-house execution
capabilities, no pledging, amongst the highest RoE of 19%/21% in FY12/13E
vs peers and an assumption the company will bid on low IRR to bag new
projects.
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