Hold IL&FS Transportation; targe Rs 182: Emkay
Emkay Global Financial Services has recommended hold rating on ILandFS Transportation Networks with a target price of Rs 182, in its June 21, 2013 research report.
June 24, 2013 / 16:32 IST
Emkay's report on ILandFS Transportation Networks
"ILandFS Transportation Networks, robust order backlog (3X FY13 Cons rev) to help construction CAGR of 25 percent over FY13-15E, but high margin fee income to stagnate implying muted EBITDA CAGR of 5 percent. Standalone leverage to surge higher to 2.2x as ITNL pumps in equity (Rs24 bn) to complete projects. High leverage in absence on meaningful rate cuts to put pressure on standalone profitability. Nine projects (4 projects to get consolidated) to start toll collection over FY14-15E. However contribution to PAT remain muted due to higher interest. Dilution eminent in/post FY15E as standalone leverage unsustainable. Stock trades close to our fair value estimate of Rs182.""With significant slow down in NHAI awarding activity (only ~1100 km awarded in FY13) and possibly impact on NHAI funding plan on account of recent termination of road project we do not foresee meaningful increase in awarding activity by NHAI. With robust order inflow in till FY13, ITNL has been able to deliver 17 percent earnings growth over FY10-13 led by its high margin fee income. However as ITNL's earning & cash flows are highly leverage to new order inflows, we believe sustaining such high growth rate in fee income is unlikely. Given this backdrop of decelerating high margin fee income growth, the high parent leverage (standalone debt at Rs53 bn with D:E at 2.2x in FY15E) and could mean increasing interest cost pressures for ITNL. We remain concerned on ITNL increasing leverage & lack of visibility from the management towards debt reduction plan. Stock trades close to our fair value estimate of Rs182. Retain Hold.""We have valued ITNL's BoT portfolio at Rs183/share (CoE of 12/13 percent - operational projects, 14 percent - under construction project & 15 percent - under development projects), E&C business at Rs155/share (4.5X FY14E EBITDA) and other subsidiaries at Rs 37/share. We maintain our hold rating on the stock with a target price of Rs 182 on account of increase in the debt in the standalone balance sheet and addition of projects khed sinnar & Barwa Adda in our valuation," says Emkay Global Financial Services research report.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. 
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