Buy ILandFS Trans; target of Rs 217: Microsec

Microsec is bullish on ILandFS Transportation Networks and has recommended buy rating on the stock with a target of Rs 217 in its June 29, 2012 research report.

“IL&FS Transportation Networks (ITNL), a leading road infrastructure company, with an illustrious parentage (IL&FS), a sharply focused business model and comfortable funding position, is all set to ride benefits emanating from the robust momentum in NHAI road project awards.ITNL has followed a disciplined bidding strategy to maintain its IRR, based on which it has judiciously built a balanced road portfolio comprising a mix of annuity & toll, spread across the breadth of the country. ITNL’s domestic portfolio to help it grow its revenue & net profit at a CAGR of 27% & 16% respectively over FY11-14.Its relative inexpensive valuation & flexibility to withstand business cycles makes it an attractive pick. We initiate coverage on ITNL with a Buy rating.”
“ITNL is a pioneer in the road BOT space and has been involved in the development and operation of roads and highways for the past two decades. ITNL has a portfolio of 23 projects spanning over 11,860 lane km spread across 16 states. Of these, 12 projects comprising 5,453 lane km of roads are operational. Moreover, these projects are geographically spread out and bi-furcated into toll and annuity, which cushions its revenues due to limited exposure to any one region or project.  Activity in the road space is picking up as a result of increased project award by the National Highway Authority of India (NHAI). The authority has awarded projects spread over more than 6,491 km in FY12. This follows from 5,000 kms of project awards in FY11. The overall target for FY13 is even higher at 8,800 km. In the recently held meeting on infrastructure sector chaired by the Prime Minister, the target for road sector award was set at 9,500 km in FY13.  ITNL’s parent, the IL&FS Group, has been a prominent player in promoting and financing public infrastructure projects in India for over 22 years and a pioneer of public private partnership projects. IL&FS's strong balance sheet and vast experience will help ITNL to pre-qualify for large projects.”
“At the CMP of Rs 183, the stock trades at a P/E and EV/EBIDTA of 7.18x and 8.86x, discounting its FY12 earnings. Due to robust order book, strong balance sheet, higher margins and Strong parentage and experienced management, we assign a PE of 7.1x and arrive at a target price of Rs 217 that reflects 18% upside over the ITNL’s current stock price of Rs 183. ITNL has a strong professional management team and it has strong emphasis on corporate governance. Indeed, in the current turbulent times, when corporate governance issues have plagued many of its peers, ITNL provides a safe choice for investors with a proven and scalable business model backed by strong fundamentals and transparent management practices,” says Microsec research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

Read More