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1QFY12: Positive surprise
ƒ Results beat our estimates, led by construction
ƒ Revenue, EBITDA, net income up 50%, 22%, 14% y-y
ƒ Construction EBITDA margin of 25.9%: 590bps above estimate
ƒ TP INR250: BOT INR186; construction INR43; others INR21
1QFY12 results
IRB reported 1QFY12 revenue of
INR8.0b, an increase of 50% y-y and
6.4% above our estimate. EBITDA of
INR3.3b increased 22% y-y and was 4%
higher than our estimate. Net income after
minority interest of INR1.3b was 14%
higher y-y and 8% higher than our
estimate.
The strong performance was led by the
construction division; construction
revenue increased 81% y-y to INR6b,
(17.3% higher than our estimate). The
construction EBITDA margin was also a
positive surprise – the reported margin of 25.9% was 590bps higher than
our estimate. We believe this was due to higher margin at the SuratDahisar project.
Toll revenue increased 14% y-y to INR2.3b (our estimate was INR2.4b)
primarily due to an 18% toll rate hike in Mumbai Pune (35% of gross toll
revenue). Surat Dahisar reported a 6.8% y-y increase in toll revenue
(INR942m, 34% of gross toll revenue) and Bharuch Surat reported 12.8%
y-y growth (INR336m, 12% of gross toll revenue). Tumkur-Chitradurga
also contributed this quarter, with INR114m (operational since 4 June),
which is essentially in line with our daily run-rate. Interest expense was
33% higher than our estimate, resulting in a 29% miss in tolling PAT.
Catalysts ahead: major road bids on the anvil
Major projects such as the Kishangarh-Ahmedabad (INR54b) and
Jabalpur-Rewa (INR19b) are coming up for bid in the next 30-45 days.
IRB has bid for four projects (including the above two) worth INR93b that
are up for bidding in the near term. We expect any project win to be a
material catalyst for the stock.
Valuation
We continue to rate IRB as our top pick in this space. We believe
execution capabilities and access to financing are key differentiators. We
maintain our BUY rating and TP of INR250. Our TP is based on a SoTP
valuation of the construction business and the highway BOT portfolio. We
value the BOT portfolio using DCF (FCFE, 13.5% average cost of equity
over the life of the project) at INR186. The construction business
contributes INR43 based on 3.2x FY13E EV/EBITDA (implied P/E of
6.0x). Real estate and future projects contribute INR8 and INR13,
respectively. Risks to our TP include lower-than-expected traffic growth,
execution delays, and lower-than expected project wins
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12: Positive surprise
ƒ Results beat our estimates, led by construction
ƒ Revenue, EBITDA, net income up 50%, 22%, 14% y-y
ƒ Construction EBITDA margin of 25.9%: 590bps above estimate
ƒ TP INR250: BOT INR186; construction INR43; others INR21
1QFY12 results
IRB reported 1QFY12 revenue of
INR8.0b, an increase of 50% y-y and
6.4% above our estimate. EBITDA of
INR3.3b increased 22% y-y and was 4%
higher than our estimate. Net income after
minority interest of INR1.3b was 14%
higher y-y and 8% higher than our
estimate.
The strong performance was led by the
construction division; construction
revenue increased 81% y-y to INR6b,
(17.3% higher than our estimate). The
construction EBITDA margin was also a
positive surprise – the reported margin of 25.9% was 590bps higher than
our estimate. We believe this was due to higher margin at the SuratDahisar project.
Toll revenue increased 14% y-y to INR2.3b (our estimate was INR2.4b)
primarily due to an 18% toll rate hike in Mumbai Pune (35% of gross toll
revenue). Surat Dahisar reported a 6.8% y-y increase in toll revenue
(INR942m, 34% of gross toll revenue) and Bharuch Surat reported 12.8%
y-y growth (INR336m, 12% of gross toll revenue). Tumkur-Chitradurga
also contributed this quarter, with INR114m (operational since 4 June),
which is essentially in line with our daily run-rate. Interest expense was
33% higher than our estimate, resulting in a 29% miss in tolling PAT.
Catalysts ahead: major road bids on the anvil
Major projects such as the Kishangarh-Ahmedabad (INR54b) and
Jabalpur-Rewa (INR19b) are coming up for bid in the next 30-45 days.
IRB has bid for four projects (including the above two) worth INR93b that
are up for bidding in the near term. We expect any project win to be a
material catalyst for the stock.
Valuation
We continue to rate IRB as our top pick in this space. We believe
execution capabilities and access to financing are key differentiators. We
maintain our BUY rating and TP of INR250. Our TP is based on a SoTP
valuation of the construction business and the highway BOT portfolio. We
value the BOT portfolio using DCF (FCFE, 13.5% average cost of equity
over the life of the project) at INR186. The construction business
contributes INR43 based on 3.2x FY13E EV/EBITDA (implied P/E of
6.0x). Real estate and future projects contribute INR8 and INR13,
respectively. Risks to our TP include lower-than-expected traffic growth,
execution delays, and lower-than expected project wins
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