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IRB 1QFY12 results were significantly ahead of DB expectations with net
sales at INR 8 bn (+56% YoY), driving an EBITDA of INR 3.29 bn (+32% YoY)
and net income of INR 1.34 bn (+14% YoY). However, this failed to drive
up stock performance - which was up by a mere 0.4% on a day, when few
other engineering results had caused sharp disappointments. At our end,
we have used the data given by the management in post result commentary
to marginally revise our EPS (2% down) and raise our TP to INR 192/sh as
we have rolled our DCF to FY13E for the toll road business. At a P/E of
12xFY12E consolidated earnings and 8xFY12 P/E for the residual EPC business - we reiterate Hold.
Important highlights from the results
1) Topline growth was largely driven by higher revenue recognition in the
construction business which grew by 81% YoY to INR c6 bn and at a runrate similar to that exhibited by the company in the last two quarters. The
income from toll road business was in line with our estimates and rose 14%
YoY driven by tariff revision in important Mumbai Pune expressway by 18%
YoY.
2) Construction margins remain quite healthy at 25.9% which remains
c1,000 bps higher than most of its peers.
3) Company has mentioned in the press release that the board has approved
an enabling resolution to raise INR 12 bn through issue of securities including equity shares/warrants with NCDs through QIP or FCCBs or Depository
receipts etc.
Our take on the results and sectoral outlook
1) Looking at the sectoral awards on roadways, we find that India has
awarded c500 kms of new projects, which is far lower than the 1,800 kms
target in 1QFY12. However these roadways project awards have come at
a time when most of the other sectors have seen little ordering activity.
Looking at the data provided by NHAI, there seems to be a reasonable
probability that ordering could pick up in the next few quarters.
2) Considering high competitive intensity and non fungible nature of EPC
capacity across geographies, it looks like the company is preparing for an
environment of accelerated order inflow if they go for equity offering. The
key to watch out for is whether the competitive intensity in bids comes
down or not and whether IRB has a superior balance sheet v/s peer groups
to take in attractive bids as and when the competitive intensity declines.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IRB 1QFY12 results were significantly ahead of DB expectations with net
sales at INR 8 bn (+56% YoY), driving an EBITDA of INR 3.29 bn (+32% YoY)
and net income of INR 1.34 bn (+14% YoY). However, this failed to drive
up stock performance - which was up by a mere 0.4% on a day, when few
other engineering results had caused sharp disappointments. At our end,
we have used the data given by the management in post result commentary
to marginally revise our EPS (2% down) and raise our TP to INR 192/sh as
we have rolled our DCF to FY13E for the toll road business. At a P/E of
12xFY12E consolidated earnings and 8xFY12 P/E for the residual EPC business - we reiterate Hold.
Important highlights from the results
1) Topline growth was largely driven by higher revenue recognition in the
construction business which grew by 81% YoY to INR c6 bn and at a runrate similar to that exhibited by the company in the last two quarters. The
income from toll road business was in line with our estimates and rose 14%
YoY driven by tariff revision in important Mumbai Pune expressway by 18%
YoY.
2) Construction margins remain quite healthy at 25.9% which remains
c1,000 bps higher than most of its peers.
3) Company has mentioned in the press release that the board has approved
an enabling resolution to raise INR 12 bn through issue of securities including equity shares/warrants with NCDs through QIP or FCCBs or Depository
receipts etc.
Our take on the results and sectoral outlook
1) Looking at the sectoral awards on roadways, we find that India has
awarded c500 kms of new projects, which is far lower than the 1,800 kms
target in 1QFY12. However these roadways project awards have come at
a time when most of the other sectors have seen little ordering activity.
Looking at the data provided by NHAI, there seems to be a reasonable
probability that ordering could pick up in the next few quarters.
2) Considering high competitive intensity and non fungible nature of EPC
capacity across geographies, it looks like the company is preparing for an
environment of accelerated order inflow if they go for equity offering. The
key to watch out for is whether the competitive intensity in bids comes
down or not and whether IRB has a superior balance sheet v/s peer groups
to take in attractive bids as and when the competitive intensity declines.
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