IRB Infrastructure: Strong construction; toll collections broadly in line apart from Bharuch-Surat ::Kotak Securities

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IRB Infrastructure (IRB)
Infrastructure
Strong construction; toll collections broadly in line apart from Bharuch-Surat. IRB
reported revenues of Rs7.36 bn (up 50% yoy) led by construction (Rs4.97 bn), however, high
interest expenses led to 9% yoy growth and 18% sequential decline in PAT to Rs1.1 bn. Traffic
growth was 6% in Mumbai-Pune and Surat-Dahisar but Surat-Bharuch at 3.5% was below
expectation (toll collections of Rs387 mn on Tumkur-Chitradurga). Marginally revise earnings and
retain BUY (TP: Rs200) on the back of strong execution, balance sheet and upside to target price.
Results outperform on construction revenues; toll collection broadly in line
IRB reported strong 2QFY12 revenues of Rs7.36 bn, up 50% yoy and 15% ahead of estimates. The
revenue outperformance was primarily on higher-than-expected construction revenues (Rs4.97 bn,
up 73% yoy). EBITDA margin at 43.7% declined by about 450 bps yoy and was about 150 bps
below our estimate of 45.2% (on higher proportion of construction revenues). High interest expense
put pressure on bottom line; reported net PAT of Rs1.1 bn, up 9% yoy, 7% ahead of estimates.
Traffic growth of about 6% in Mumbai-Pune and Surat-Dahisar but only 3.4% in Bharuch-Surat
Toll collections grew by 18% yoy (on three key projects) and toll collection was reported at Rs387
mn on Tumkur-Chitradurga project.
􀁠 Mumbai-Pune–traffic growth of 6.3%. Toll collections increased by 24% yoy; adjusting for
the 18% toll revision in April 1, 2011 implies a traffic growth of about 6-6.5% for the project.
􀁠 Surat-Dahisar–traffic growth seems to pick up to ~6%. Toll collections of Rs939 mn, up 13%
yoy, implied traffic growth of 6.4% adjusted for 5% rate hike in Sept ’10 and 10.5% in Sept ’11.
􀁠 Bharuch-Surat–traffic growth very low at only 3-4 %. Toll revenues increased by 13.8%
yoy to Rs347 mn; implied a traffic growth of 3-4% accounting for 10% toll revision.
􀁠 Tumkur-Chitradurg–toll collections keep pace with expectation set earlier. Toll collection
of Rs387 mn, implying Rs4.2 mn per day, was in line with the pace set in 1QFY12.
Panaji-Goa dropped from backlog, cites easing competition, likely to remain equity surplus
Other highlights from the results include (1) removes Panaji-Goa project from backlog on
significant delays on land acquisition, (2) cites easing in competition on lower bidders per project
in recent awards; revised target IRR to 18% for project bids, and (3) likely equity requirement of
Rs22 bn over FY2012-20E – internal accruals more than sufficient to fund the same.
Revise estimates; reiterate BUY with a target price of Rs200/share
We revise our consolidated estimates to Rs12.6 and Rs14.9 from Rs12.1 and Rs15.7 for FY2012E
and FY2013E. We have delayed COD for Amritsar-Pathankot, Jaipur-Deoli, Talegaon-Amravati and
Panaji to Goa-Karnataka projects. Retain BUY with a TP of Rs200.