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Reliance Infrastructure (RELI) reported a PAT (standalone) of INR4.2bn
(our estimates INR3.3bn). This was due to superior execution by EPC
vertical which clocked revenues of INR29.4bn with ~11% EBIT margins,
aided by INR137mn depreciation write-back. RELI expects this
momentum to continue in FY13 too though margins will be in the range
of 8%-10%. RELI has addressed most of the regulatory issues post the
recent equity infusion in Delhi discoms while almost all infrastructure
projects would be fully operational over the next 12-15 months. Hence
we expect various operational risks to be addressed. Maintain BUY/SO.
EPC margins lift Q3 earnings
RELI’s Q3FY12 PAT at INR4.2bn was aided by an improvement in EPC business (177%
revenue growth YoY) along with superior margins at ~11% against 9.5% in Q3FY11.
Prior period depreciation write-back of INR137mn aided the PAT for the quarter.
Mumbai power business has a regulatory asset creation of INR22bn and deferred
revenues of INR48bn (over six years). In Delhi, tariff issues have been addressed with
the approval of the INR51bn financial package and INR82bn regulatory asset creation
while INR62bn is awaiting final approvals.
Delhi metro traffic improving, infra project execution augments
RELI has one metro and five operational road projects and it is expected to
operationalise the balance 5 roads and 1 metro projects over the next 12-15 months.
This would minimize the execution risk and also aid cash flows. In Delhi metro, the pax
flow has increased from 4,000/day to the current 20,000/day over the last four
quarters. Having leased out ~30% of the retail space, the management expects to tie
up the balance by next year.
Outlook and valuation: Risks being mitigated; maintain BUY
We believe that most of the operational risks are getting addressed while the
management is being prudent in their choice of infra assets bidding/acquisition,
leading to better investor confidence on value accretion on retained earnings/surplus
cash.. Maintain BUY with a target price of INR1267/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Infrastructure (RELI) reported a PAT (standalone) of INR4.2bn
(our estimates INR3.3bn). This was due to superior execution by EPC
vertical which clocked revenues of INR29.4bn with ~11% EBIT margins,
aided by INR137mn depreciation write-back. RELI expects this
momentum to continue in FY13 too though margins will be in the range
of 8%-10%. RELI has addressed most of the regulatory issues post the
recent equity infusion in Delhi discoms while almost all infrastructure
projects would be fully operational over the next 12-15 months. Hence
we expect various operational risks to be addressed. Maintain BUY/SO.
EPC margins lift Q3 earnings
RELI’s Q3FY12 PAT at INR4.2bn was aided by an improvement in EPC business (177%
revenue growth YoY) along with superior margins at ~11% against 9.5% in Q3FY11.
Prior period depreciation write-back of INR137mn aided the PAT for the quarter.
Mumbai power business has a regulatory asset creation of INR22bn and deferred
revenues of INR48bn (over six years). In Delhi, tariff issues have been addressed with
the approval of the INR51bn financial package and INR82bn regulatory asset creation
while INR62bn is awaiting final approvals.
Delhi metro traffic improving, infra project execution augments
RELI has one metro and five operational road projects and it is expected to
operationalise the balance 5 roads and 1 metro projects over the next 12-15 months.
This would minimize the execution risk and also aid cash flows. In Delhi metro, the pax
flow has increased from 4,000/day to the current 20,000/day over the last four
quarters. Having leased out ~30% of the retail space, the management expects to tie
up the balance by next year.
Outlook and valuation: Risks being mitigated; maintain BUY
We believe that most of the operational risks are getting addressed while the
management is being prudent in their choice of infra assets bidding/acquisition,
leading to better investor confidence on value accretion on retained earnings/surplus
cash.. Maintain BUY with a target price of INR1267/share.
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