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IL&FS Transportation (ITNL) is the only pure asset developer & a management driven company in the road BOT space. IL&FS, parent company of ITNL, having two decades of experience in developing & funding infrastructure projects in India has helped ITNL build organizational capabilities in the infra asset development space. ITNL has followed a disciplined bidding strategy to maintain its hurdle IRR, based on which it has judiciously built a balanced road portfolio comprising a mix of annuity (32%, lane kms) & toll (68%, lane kms) spread across the breadth of the country. While its international acquisition’s may not accrue value in the near term we expect ITNL’s domestic portfolio to help it grow its revenue & net profit at a CAGR of 21% & 4% respectively over FY11-14P. Also, its relative inexpensive valuation & flexibility to withstand business cycles makes it an attractive pick. We initiate coverage on ITNL with a Buy rating.
Flexible business model & superior project management
IL&FS’s more than two decade experience in developing & financing infrastructure projects across sectors within the country has helped ITNL develop superior organizational capabilities in terms of developing, designing, financing & maintaining infrastructure assets. Although, ITNL doesn’t have construction capabilities & misses out on cash flow & IRR from this business we believe this lends flexibility to the business model to withstand business cycles.
Portfolio mix better than peers
ITNL’s Toll/Annuity projects ratio is 59:41 and State/Central projects at 58:42. Within state highways, some projects are annuity-based, allaying investor fears of low-density/low-returns stretches. Also, the concession tail period of its projects is more than 15 years lending support to cashflows & valuation.With a strong order inflow of ` 81bln in last two year, we expect ITNL to post a 21% consolidated revenue CAGR over FY11-FY14E.
Cash flow sufficient for near term equity requirement; lesser risk of dilution
According to our estimates ITNL has an equity requirement of ` 3.73bln over FY12-14E which is expected to be partially met through cumulative free cash flow generation of ` 2.7bln over the same period.
Valuation:
At CMP of ` 209, the company is trading at 1.5x FY12E & 1.3x FY13E P/BV & 9.8x FY12E & 10.2x FY13E EV/EBIDTA respectively. In addition, we believe a BOT portfolio with 32% of annuity projects is less sensitive to traffic growth and provides support to the current valuations. We initiate coverage with a Buy recommendation and a PT of ` 249. Key risks include deterioration in international business.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IL&FS Transportation (ITNL) is the only pure asset developer & a management driven company in the road BOT space. IL&FS, parent company of ITNL, having two decades of experience in developing & funding infrastructure projects in India has helped ITNL build organizational capabilities in the infra asset development space. ITNL has followed a disciplined bidding strategy to maintain its hurdle IRR, based on which it has judiciously built a balanced road portfolio comprising a mix of annuity (32%, lane kms) & toll (68%, lane kms) spread across the breadth of the country. While its international acquisition’s may not accrue value in the near term we expect ITNL’s domestic portfolio to help it grow its revenue & net profit at a CAGR of 21% & 4% respectively over FY11-14P. Also, its relative inexpensive valuation & flexibility to withstand business cycles makes it an attractive pick. We initiate coverage on ITNL with a Buy rating.
Flexible business model & superior project management
IL&FS’s more than two decade experience in developing & financing infrastructure projects across sectors within the country has helped ITNL develop superior organizational capabilities in terms of developing, designing, financing & maintaining infrastructure assets. Although, ITNL doesn’t have construction capabilities & misses out on cash flow & IRR from this business we believe this lends flexibility to the business model to withstand business cycles.
Portfolio mix better than peers
ITNL’s Toll/Annuity projects ratio is 59:41 and State/Central projects at 58:42. Within state highways, some projects are annuity-based, allaying investor fears of low-density/low-returns stretches. Also, the concession tail period of its projects is more than 15 years lending support to cashflows & valuation.With a strong order inflow of ` 81bln in last two year, we expect ITNL to post a 21% consolidated revenue CAGR over FY11-FY14E.
Cash flow sufficient for near term equity requirement; lesser risk of dilution
According to our estimates ITNL has an equity requirement of ` 3.73bln over FY12-14E which is expected to be partially met through cumulative free cash flow generation of ` 2.7bln over the same period.
Valuation:
At CMP of ` 209, the company is trading at 1.5x FY12E & 1.3x FY13E P/BV & 9.8x FY12E & 10.2x FY13E EV/EBIDTA respectively. In addition, we believe a BOT portfolio with 32% of annuity projects is less sensitive to traffic growth and provides support to the current valuations. We initiate coverage with a Buy recommendation and a PT of ` 249. Key risks include deterioration in international business.
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