Angel Broking's report on ILandFS Transportation Networks (ITNL)For 1QFY2016, the consolidated revenue of IL&FS Transportation Networks (ITNL) was up 15.8% yoy to Rs 1,644cr, reflecting a 9.9% increase in construction income to Rs 930cr. Higher contribution from high-margin Annuity/Toll business led to a 267bp yoy expansion in the EBITDA margin to 32.2%. Despite 26.3% yoy EBITDA growth, higher interest expense led to 97.9% decline in the PAT to Rs 3cr.ITNL reported an order backlog of Rs 15,791cr as of 1QFY2016-end, which gives construction segment revenue visibility for over next 36 months.The Consolidated debt stood at Rs 24,832cr, reflecting D/E ratio of 4.2x (vs debt of Rs 19,757cr as of 1QFY2015 and then D/E ratio of 3.5x).ITNL’s incremental equity requirement towards BOT projects for the next 2-3 years is at ~Rs 557cr. 9 of the ongoing BOT projects are expected to report Commercial Operations Date (CoD) in the next 18 months, which in turn would add to the FY2016-2017E Toll/ Annuity Income.Outlook and Valuation: "Despite the company’s robust order backlog and strong execution capabilities, we are concerned about the company’s higher consol. D/E ratio, which is eating into the profits. Even though the Management highlighted strategic initiatives to reduce debt, we sense it would take more time than anticipated to execute the same. This could possibly lead to some pressure on the company’s stock price. To capture higher leverage and delays in strategic initiatives, we have revised down our estimates. We now expect ITNL to report an 18.3% top-line CAGR and negative 47.1% bottom-line CAGR (mainly owing to higher interest expenses) during FY2015-17E. Using SoTP based valuation methodology, we arrive at FY2017E based fair value of Rs 130 for the stock. Given the limited upside potential in the stock price from the current levels, we maintain our Neutral rating on the stock", says Angel Broking research report.For all recommendations, click here 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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