Buy IRB Infra; target of Rs 320: Sharekhan

Sharekhan's report on IRB Infrastructure Developers

For Q3FY2015, IRB Infrastructure Developers (IRB) reported a net profit growth of 22.1% on account of a strong performance by the BOT segment (revenues up 54% YoY) led by a double-digit traffic growth in few projects. On the flip side, the construction business (revenues down 14% YoY), higher interest expenses (after the commissioning of the Jaipur-Deoli project) and depreciation (amortisation of premium deferment of two projects) limited the net profit growth.

The company’s order book stands at Rs11,023 crore (including Rs5,500 crore of projects bagged recently) providing revenue visibility for the construction business over the next three to four years. Robust traffic growth witnessed across few projects signalling early signs of economic uptick is expected to drive the BOT revenues.

"IRB is well funded to meet the Rs2,600-crore equity requirement for the next three years from internal accruals. An improving macro environment (better visibility of the tendering business, potential easing of interest rates, etc) and a potential upside from a better than expected growth in the traffic on the back of an economic revival are the key re-rating triggers for the stock. We maintain our Buy rating on the stock with a price target of Rs 320", says Sharekhan research report.

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