Buy IRB Infrastructure; target of Rs 221: KRChoksey

“IRB Infrastructure reported Q3FY12 consolidated revenues of Rs 745 crore (up 11.5%, YoY), above to estimates, primarily increased by construction income of Rs 525 crore (up 12.7%, YoY) and Toll revenue grew by Rs 253.5 crore (up 18.4%, YoY). EBIDTA grew to Rs 342 crore (up 16.4%, YoY) and EBIDTA Margins improved by 193 bps YoY basis, primarily improved due to decrease in raw material prices. Interest costs was flat (QoQ) due to withdrawn of Rs 6 bn ECB from overseas, depreciation grew to Rs 725 crore primarily amortization from Surat Dahisar had been added. Effective tax rate was 18.0%, one time reversal of Rs 7.0 bn (MAT Credit) from Surat Dahisar.”

“Strong Construction order backlog of Rs 91 bn improves the future visibility for the next 2.5 years. Better than expected execution in projects Talegaon-Amravati (~Rs 176 cr), Jaipur-Tonk-Deoli (~Rs 185 cr) and Amritsar-Pathankot (~Rs 99.3 cr) improves the topline in last quarter and we have incorporated revenue growth in construction segment by 3% & 4% for FY12E & FY13E respectively. Gross toll collection reaches up to Rs 3.22 crore (+29.6 YoY), primarily inclusion of tumkur chitradurga and toll hike in Mumbai-Pune (+23% YoY) and Surat-Dahisar (+11.3% YoY) at start of current financial year.”

“We recommend “Buy” on IRB Infrastructure Ltd with a Target Price of Rs 221 on SOTP basis. We have excluded Panji-Goa projects from valuation due to cancellation by NHAI. Considering the better execution on ongoing projects, we have incorporated revenue growth in construction segment by 3% & 4% for FY12E & FY13E respectively. Following are positive triggers for IRB in near future 1.) strong operating cash flow of Rs 10 bn which is best in the overall construction industry, 2.) better execution capabilities 3.) interest rates peak out & stability in raw materials will improve profitability & 4.) NHAI has a plan to award 6500 km new projects every year till FY15E,” says KRChoksey research report.

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