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Reliance Infra (RCTDF, Buy)
Bear Case: What can go wrong
�� In the bear case, RELI's Mumbai regulated discom shall be very resilient so
will have no impact on earnings. However, the risk lies with the promoters’
involvement in 2G scam and regulatory and commercial risks at R. power
�� We have removed 12GW of Reliance Power, an associate of R-Infra,
projects from our SOTP which are facing regulatory or commercial
challenges or are not ordered including Chitrangi (21% of our current SOTP),
Krishnapatnam UMPP, Shahpur Coal TPP, Siyom, Tato II and Kalai II. This
would also impact E&C revenues of R Infra and lead to 14% cut to BofAMLe
and 6% fall in FY13E parent EPS.
�� In bear case, we expect an EPS CAGR of 4% over FY11-14E
�� Toll / Ticket revenue to decline on fall in traffic at roads / metro projects,
assumed a 10% cut in traffic at the roads and metro projects in FY12 & 13E.
Base Case:
�� Earnings to grow at an EPS CAGR of 14% over FY11-14E on improving
outlook of its defensive Mumbai license area profits and E&C scale-up.
�� In the base case, we expect the stock will trade at Rs1080/share valuing it at
1.1x consol FY11 P/BV.
Risk-Reward: Favorable subject to promoter
concerns
�� In the bear case, we expect the stock will trade at Rs426/share valuing it at
0.4x consol FY11 P/BV.
�� In the base case, we expect the stock will trade at Rs1080/share valuing it at
1.1x consol FY11 P/BV.
�� The risk-reward appears favorable once concern surrounding the ADAG
group recedes and the company demonstrates execution track-record, which
should also reduce treasury / cash concerns.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Infra (RCTDF, Buy)
Bear Case: What can go wrong
�� In the bear case, RELI's Mumbai regulated discom shall be very resilient so
will have no impact on earnings. However, the risk lies with the promoters’
involvement in 2G scam and regulatory and commercial risks at R. power
�� We have removed 12GW of Reliance Power, an associate of R-Infra,
projects from our SOTP which are facing regulatory or commercial
challenges or are not ordered including Chitrangi (21% of our current SOTP),
Krishnapatnam UMPP, Shahpur Coal TPP, Siyom, Tato II and Kalai II. This
would also impact E&C revenues of R Infra and lead to 14% cut to BofAMLe
and 6% fall in FY13E parent EPS.
�� In bear case, we expect an EPS CAGR of 4% over FY11-14E
�� Toll / Ticket revenue to decline on fall in traffic at roads / metro projects,
assumed a 10% cut in traffic at the roads and metro projects in FY12 & 13E.
Base Case:
�� Earnings to grow at an EPS CAGR of 14% over FY11-14E on improving
outlook of its defensive Mumbai license area profits and E&C scale-up.
�� In the base case, we expect the stock will trade at Rs1080/share valuing it at
1.1x consol FY11 P/BV.
Risk-Reward: Favorable subject to promoter
concerns
�� In the bear case, we expect the stock will trade at Rs426/share valuing it at
0.4x consol FY11 P/BV.
�� In the base case, we expect the stock will trade at Rs1080/share valuing it at
1.1x consol FY11 P/BV.
�� The risk-reward appears favorable once concern surrounding the ADAG
group recedes and the company demonstrates execution track-record, which
should also reduce treasury / cash concerns.
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