Buy IVRCL Infrastructure; target of Rs 64: Angel Broking

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Buy IVRCL Infrastructure; target of Rs 64: Angel Broking

Angel Broking is bullish on IVRCL Infrastructure and has recommended buy rating on the stock with a target of Rs 64 in its August 16, 2011 research report.

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Angel Broking is bullish on IVRCL Infrastructure and has recommended buy rating on the stock with a target of Rs 64 in its August 16, 2011 research report.

"IVRCL Infrastructure (IVRCL) reported disappointing set of numbers for 1QFY2012, with lower-than-expected performance on all fronts despite our estimates being the lowest on street. We are revising our estimates downwards and have reduced our target P/E multiple to 7x from 8x to factor in poor performance in 1QFY2012, high interest rate scenario and persistent pessimism surrounding the sector. However, the recent sharp fall in IVRCL's stock price has brought the stock at undemanding valuations of 0.5x P/BV on FY2013E (standalone)."

"IVRCL reported abysmal 1.6% yoy top-line growth to Rs 1,124.3cr (Rs 1,106.4cr), below our and street estimates. On the operating margin front, the company posted dismal margin of 7.6% (9.1%), a dip of 150bp yoy, against our estimate of 8.9% owing to commodity price pressures, high labour charges and ineligibility to pass on escalations in water projects (primarily in Tamil Nadu region). Further, IVRCL reported a shocking 85.0% yoy decline on the earnings front to Rs 4.2cr (Rs 28.1cr), against our estimate of Rs 15.9cr and consensus estimate of Rs 22.3cr. This was primarily on account of low margin and higher interest cost (Rs 62.8cr)."

"We have valued IVRCL on an SOTP basis. The company's core construction business is valued at P/E of 7x FY2013E EPS of Rs 6.3 (Rs 44.2/share), whereas its stake in subsidiaries IVR Prime (Rs 15.0/share) and Hindustan Dorr-Oliver (Rs 4.5/share) has been valued on mcap basis, post assigning a 20% holding company discount. At the CMP of Rs 40, the stock is trading at 6.3x FY2013E EPS and 0.5x FY2013E P/BV on a standalone basis and adjusting for its subsidiaries at 3.2x FY2013E EPS and 0.2x FY2013E P/BV. Therefore, on the back of the company's robust order book-to-sales ratio (2.7x FY2011 revenue, adjusted for L1 and slow-moving orders) and attractive valuations, we maintain our Buy view on the stock with a target price of Rs 64," says Angel Broking research report.

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To read the full report click on the attachment