IRB -Slower execution due to monsoon… :: ICICI Securities,

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Slower execution due to monsoon…
• The topline at | 883 crore (decline of 6.0% YoY) was lower than our
estimate of | 1079.3 crore mainly due to slower execution in the
construction division (| 452 crore vs. our estimate: | 644 crore)
• The EBITDA margin of 59.2% was much higher than our estimate of
52.2% due to higher contribution of the BOT division (EBITDA
margin: 89.0%) to the topline than that of the construction division
(EBITDA margin: 34.5%)
• The net profit at | 121.8 crore (14.0% YoY growth) was lower than
our estimate of | 135.4 crore mainly due to the topline miss
• The management said the company’s current equity requirement is
| 3,400 crore over the next three or four years for which the
company is well placed. However, it may raise fund up to | 1,500
crore in near future to meet its equity requirement of new projects
Strong construction performance on the way…
Recently, IRB bagged three new projects aggregating ~| 6,700 crore
(Solapur Yedeshi - | 1317 crore, Yedeshi Aurangabad - | 2754 crore,
Kaithal Rajasthan - | 2035 crore and Mumbai-Pune Phase II – 695 crore).
IRB achieved financial closure (FC) of Solapur-Yedeshi project in Q2FY15.
Management is expecting FCs of the other two projects in the next two
months. These new order wins have taken the order book to ~| 11,587
crore, 3.1x TTM revenues providing strong visibility over construction
revenues in the next couple of years. Consequently, we expect
construction revenues to grow at 15.7% CAGR to | 3417.5 in FY14-16E.
Healthy CF from well-built BOT projects to support equity requirement…
Considering IRB’s ongoing project portfolio, it has an equity requirement
of | 3,400 crore over the next three or four years. IRB’s gross toll
collection has grown at a CAGR of 20.6% to | 4.6 crore /day in FY11-14.
Going ahead, we anticipate IRB’s gross toll collection will grow at a CAGR
of 24.1% in FY14-16E to | 7.1 crore/day. IRB being one of the largest BOT
toll operators with 21 projects under its portfolio, we do not see any
major funding issue for its existing equity requirement. Furthermore,
according to the management, it may raise funds up to | 1,500 crore in
the near future to meet its equity requirement for new projects.
Earnings to jump significantly on account of change in premium policy…
From April, 2014, IRB changed the policy for premium booking due to
premium rescheduling. Rather than booking net revenues (gross toll
collection – NHAI Premium) in P&L, it has now created intangible assets
for the premium payable (over the life of concession period), which will
be amortised as per toll revenues. Consequently, we expect IRB’s net
profit to grow at 22.6% CAGR to | 690.3 during FY14-16E.
Positives already factored in…
IRB being a leading player in the road space with a strong balance sheet
is likely to be a key beneficiary of NHAI’s plan to roll out road projects of
~3,500 km on a BOT basis in H2FY15. Secondly, given the strong order of
| 11,587 crore providing strong revenue visibility, we expect its earning to
grow at 22.6% CAGR during FY14-16E. However, we believe most of the
positives have already been priced in the CMP. Hence, we maintain HOLD
recommendation with an SOTP based target price of | 269/share.

LINK
http://content.icicidirect.com/mailimages/IDirect_IRBInfra_Q2FY15.pdf