Buy IRB Infrastructure Developers; target of Rs 139: Prabhudas Lilladher

Prabhudas Lilladher's research report on IRB Infrastructure Developers

We recently hosted Mr. Virendra Mhaiskar, MD of IRB Infrastructure Developers Ltd (IRB) to gain insights on company’s growth strategy and industry outlook. Management expects healthy ordering activity from NHAI primarily on BOT route (due to cash crunch at NHAI) with 15 BOT projects to bid in pipeline, already. The company expects to add few more projects to its portfolio. Recently IRB emerged as a preferred bidder in ~Rs26bn (18% higher than NHAI costs) BOT project- Palsit to Dankuni on NH-19; however, the bid just got terminated (our understanding is due to pricing) from NHAI. The balance sheet has strengthened with a) retention of Mumbai-Pune expressway on TOT mode (IRB tied up Rs66bn debt and completed equity infusion of Rs14.3bn equity in June’20) and b) conclusion of stake sale in a private InVIT (housing 9 BOT Assets) to GIC affiliates. IRB received its first tranche of Rs37.5bn payment, of which Rs30bn was used to repay existing debt & Rs7.5bn retained for equity infusion in its under-construction projects. This led to substantial deleveraging of the balance sheet, improved liquidity position by restoring its ability to take up & execute newer projects.

Outlook

We maintain BUY rating on the stock with an SOTP based TP of Rs139. At CMP, the stock trades at a P/E of 8.7x/5.3x on FY21E/FY22E EPS and is trading at an EV of 10.7x/9.4x FY21E/FY22E EBITDA.

IRB Infrastructure Developers 21072020-prabhu

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