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EARNINGS REVIEW
IL&FS Transportation Networks (ILFT.BO)
Buy Equity Research
Above expectations: strong execution well supported by toll growth
What surprised us
ITNL reported Q3FY12 Net Income of Rs 1bn which came above GS and
Bloomberg consensus expectations - primarily driven by strong revenues
in the construction segment (+125% yoy) and well supported by Elsamex
and other toll based SPVs (+46% yoy). Margin however was lower
primarily due to higher composition of construction revenue in the mix
and increase in construction related costs by 220 bps yoy. Toll collection in
the quarter was up 4% qoq and 15% yoy on like for like projects– with
close to Rs 19mn daily toll collection. The company expects 10-12% traffic
increase on its toll project portfolio for FY12E implying a strong Q4. The
total bid-pipeline for the company is close to Rs 568 bn as of Jan end.
What to do with the stock
Excluding strong bid pipeline of Rs 86bn at RFP stage we expect revenue
growth of 21% over the next 2 years based on the current order book. In
addition, we expect ITNL to be the biggest beneficiary of any interest rate
cut in our coverage as almost 40% of the project portfolio is annuity based
– resulting in increasing project NPV.
We change our FY13/14E EPS by +9%/+16% as we incorporate the recently
won Kiratpur road project in our estimates. As a result of above
expectation results and new project win, our SOTP based 12m TP
increases to Rs 230 (from Rs 215 earlier). The stock is trading at FY13E P/B
of 1.2X vs. long term median of 2X – and generates 20-21% ROE over the
next 2 years – which in our view is attractive. We retain our Buy rating.
Risks: Further increase in interest rates; delays in new contract awards.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
IL&FS Transportation Networks (ILFT.BO)
Buy Equity Research
Above expectations: strong execution well supported by toll growth
What surprised us
ITNL reported Q3FY12 Net Income of Rs 1bn which came above GS and
Bloomberg consensus expectations - primarily driven by strong revenues
in the construction segment (+125% yoy) and well supported by Elsamex
and other toll based SPVs (+46% yoy). Margin however was lower
primarily due to higher composition of construction revenue in the mix
and increase in construction related costs by 220 bps yoy. Toll collection in
the quarter was up 4% qoq and 15% yoy on like for like projects– with
close to Rs 19mn daily toll collection. The company expects 10-12% traffic
increase on its toll project portfolio for FY12E implying a strong Q4. The
total bid-pipeline for the company is close to Rs 568 bn as of Jan end.
What to do with the stock
Excluding strong bid pipeline of Rs 86bn at RFP stage we expect revenue
growth of 21% over the next 2 years based on the current order book. In
addition, we expect ITNL to be the biggest beneficiary of any interest rate
cut in our coverage as almost 40% of the project portfolio is annuity based
– resulting in increasing project NPV.
We change our FY13/14E EPS by +9%/+16% as we incorporate the recently
won Kiratpur road project in our estimates. As a result of above
expectation results and new project win, our SOTP based 12m TP
increases to Rs 230 (from Rs 215 earlier). The stock is trading at FY13E P/B
of 1.2X vs. long term median of 2X – and generates 20-21% ROE over the
next 2 years – which in our view is attractive. We retain our Buy rating.
Risks: Further increase in interest rates; delays in new contract awards.
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