Buy IRB Infra; target of Rs 229: Dolat Capital

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Buy IRB Infra; target of Rs 229: Dolat Capital

Dolat Capital is bullish on IRB Infra and has recommended buy rating on the stock with a target of Rs 229 in its January 25, 2012 research report.

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Dolat Capital is bullish on IRB Infra and has recommended buy rating on the stock with a target of Rs 229 in its January 25, 2012 research report.

"IRB has reported lower-than-estimated growth in consolidated revenue at 12% YoY to Rs 7455 mn for Q3FY12. This was mainly on account of lowerthan- estimated construction revenue (EPC). It has grown by meager 2% YoY as against our estimate of 26% growth. Execution on under-construction projects like Pathankot-Amritsar, Talegaon-Amaravati is gathering momentum."

"Net toll revenue jumped 31% YoY and 19% QoQ to Rs 2772 mn. The YoY growth was led by 23% jump in toll revenue in Mumbai-Pune project (Net toll revenue share - 36%) which witnessed 18% tri-annual tariff hike in April- 11. Couple of other projects - Surat Dahisar (Net toll revenue share - 36%) and Bharuch Surat (Net toll revenue share - 36%) also benefited by toll hike of 10% each in Sep-11 and July-11 respectively. EBIDTA margin expanded by 194 bps to 46%. This was on account of two things - a) flat total direct cost led by 41% YoY decline contract expense which occupied 40% share in the total direct cost. Consequently, total direct cost as a percentage of sales lowered by 359 bps YoY from 50.2% to 46.5%; b) BOT margin also expanded by 176 bps YoY. Reported PAT margin slipped to 17.6% as against 19.9% in the same period last fiscal. This was primarily on account of 73% YoY growth in the interest cost. Tax rate has increased by meager 56 bps YoY as IRB availed MAT credit in BOT segment. Reported PAT post minority interest declined 1.2% YoY."

"IRB is well capitalized to undertake additional projects worth Rs 4-5bn. The company has avoided bidding for projects less that Rs 15 bn to protect IRR and maintain its stance of adding fresh orders worth Rs 4-5 bn each year. IRB is qualified for projects worth Rs 18 bn at RFP stage and for projects worth Rs 483 bn at RFQ stage. Execution of all under construction projects is on schedule and operating margin in construction segment is expected to be around 20%. We believe, IRB has demonstrated its ability to bag projects at decent IRRs in the past. We have valued IRB on an SOTP basis to arrive at a fair price of Rs 229 per share. We maintain a Buy on the stock," says Dolat Capital research report.   

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