IVRCL Infrastructure & Project- Execution challenges persist- valuation attractive ::Emkay

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IVRCL Infrastructure & Project

Execution challenges persist- valuation attractive

BUY

CMP: Rs 39                                       Target Price: Rs 60

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n     IVRCL’s Q1FY12 APAT at Rs42 mn (-85% yoy) significantly below est. Execution remains sluggish –revenues +1.4% yoy to Rs 11.2bn, below estimates 

n     EBITDA at Rs0.8bn (-17%yoy) v/s est. Rs1.2bn -margins down 169 bps yoy to 7.4% as execution issue was aggravated by rising RM cost & time lag in passing cost esc 

n     Backlog of Rs217 bn at 3.9X FY11 revenue provides visibility however headwind persists as 20%+ backlog remains slow moving. Cut 12E/13E EPS by -36%/-37% -Cut TP to Rs60  

n     Though earnings remain under pressure, our EPS est (FY11-13E EPS CAGR of -5.5%) already factors in the same. 45%+ stock price correction could provide valuation support - Buy