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IRB Infrastructure (XIRBF, 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, leading to lower toll escalation.
Given the continuing high competitive intensity to win new projects from
NHAI, in the bear case, we assume that the new order inflow to drop by
Rs10bn i.e. by 40% in FY13E and 25% in FY14E.
Higher E&C expenses by100bps leading to fall in E&C margins
Higher interest rate rise by 50bps as leverage is amongst the lowest vs peers
Consequently, we estimate an earnings decline of 25% in FY13E to Rs3.9bn.
Base case: Riding on strong execution
We estimate an 80% jump in the toll road asset portfolio over FY12-14E from
700km at present to 1,272 km by FY14E. Accordingly, average toll revenue
would go up from Rs23mn/day in FY11 to Rs44mn/day by FY14E.
E&C order book at Rs96.4bn (3.3x FY12E consol revenues) would drive the
earnings and offset decline in toll profits.
New order inflow is assumed at Rs25bn in FY13E (vs earlier Rs30bn) and
Rs40bn in FY14E. Accordingly, we estimate earnings of Rs5.2bn in FY13E
(4% cut). Lower PO to Rs208 (vs Rs213 earlier).
Risk-reward: Favourable
In the bear case, we expect the stock to trade at Rs132/share implying P/E of
8x FY13E and P/BV of 1.2x FY13E. In our base case, we expect the stock
could trade at Rs208/share implying P/E 13x FY13E and P/BV of 1.9xFY13E.
Overall, the risk-reward appears favourable on strong in-house execution
capabilities, concern on share pledging recedes and so long as company bid
on IRR to bag new projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IRB Infrastructure (XIRBF, 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, leading to lower toll escalation.
Given the continuing high competitive intensity to win new projects from
NHAI, in the bear case, we assume that the new order inflow to drop by
Rs10bn i.e. by 40% in FY13E and 25% in FY14E.
Higher E&C expenses by100bps leading to fall in E&C margins
Higher interest rate rise by 50bps as leverage is amongst the lowest vs peers
Consequently, we estimate an earnings decline of 25% in FY13E to Rs3.9bn.
Base case: Riding on strong execution
We estimate an 80% jump in the toll road asset portfolio over FY12-14E from
700km at present to 1,272 km by FY14E. Accordingly, average toll revenue
would go up from Rs23mn/day in FY11 to Rs44mn/day by FY14E.
E&C order book at Rs96.4bn (3.3x FY12E consol revenues) would drive the
earnings and offset decline in toll profits.
New order inflow is assumed at Rs25bn in FY13E (vs earlier Rs30bn) and
Rs40bn in FY14E. Accordingly, we estimate earnings of Rs5.2bn in FY13E
(4% cut). Lower PO to Rs208 (vs Rs213 earlier).
Risk-reward: Favourable
In the bear case, we expect the stock to trade at Rs132/share implying P/E of
8x FY13E and P/BV of 1.2x FY13E. In our base case, we expect the stock
could trade at Rs208/share implying P/E 13x FY13E and P/BV of 1.9xFY13E.
Overall, the risk-reward appears favourable on strong in-house execution
capabilities, concern on share pledging recedes and so long as company bid
on IRR to bag new projects.
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