Buy IRB Infra; target of Rs 240: Emkay

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Buy IRB Infra; target of Rs 240: Emkay

Emkay Global Financial Services is bullish on IRB Infra and has recommended buy rating on the stock with a target of Rs 240 in its January 25, 2012 research report.

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Emkay Global Financial Services is bullish on IRB Infra and has recommended buy rating on the stock with a target of Rs 240 in its January 25, 2012 research report.

"IRB Infra, higher than anticipated execution at 2 projects (Amravati-Talegaon & Jaipur-Deoli) during Q3 made up for the revenue gap created by the exit of Surat Dahisar. IRB surprised positively with an impressive 9.4%yoy growth on core E&C revenues. We have increased our execution on the two projects in FY12E based on the run rate achieved in Q3FY12, still we believe E&C revenues traction will taper in Q4FY12E, considering higher base effect kicking in Q4FY12E. Traction would regain pace with the execution commencing at Ahmedabad Vadodara project (EPC -Rs 35.2bn) from Q1FY13E."

"EBIDTA at Rs3.4 bn stayed ahead of estimates mainly led by E&C margins at 24.4% v/s exp of 22.3% and the higher execution on the construction vertical. APAT at Rs 1.24bn v/s exp Rs 0.9bn led by beat on the operating EBITDA front. Depreciation came in lower due to the delayed commissioning of Surat Dahisar & interest expense has grown 73% yoy to Rs 1.42bn. APAT adjusted for the one off reversal in Tax expense on the Surat Dahisar project which was provided in the earlier quarters. We have increased our margin expectation for the construction vertical led by strong depiction in Q3FY12 by IRB in sustaining E&C margins at 24.4% even without contribution from Surat Dahisar project."

"We have increased our margin for E&C division by 100 bps and fine tuned the execution in several projects led by the delivered performance which is leading to 4% upgrade in FY12E earnings. Order book at Rs 91.3bn provides significant visibility for the E&C vertical. The implied drivers as well repose a lot of confidence in the valuation case as the stock implies a 2.8x construction FY13E earnings multiple to justify the current market price," says Emkay Global Financial Services research report.    

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