Buy IRB Infrastructure Developers; target of Rs 288: HDFC Securities

HDFC Securities' research report on IRB Infrastructure Developers
IRB’s 1QFY18 Revenue, EBIDTA and PAT were 30/16.3/10.9% ahead of our estimates on account of robust EPC revenue growth of 45% YoY.EBITDA margins contracted ~600bps YoY to 45% led by change in revenue mix towards EPC (73% rev share vs 61% YoY) which has lower EBIDTA margins (30%) vs BOT Assets (85%). IRB’s 1QFY18 order backlog of Rs 89.1bn (2.5x FY17 EPC revenue) provides growth visibility on EPC front with EPC revenue expected to grow 10-15% in FY18E.

Outlook

Traffic growth to meaningfully pick up across projects from 3QFY18E on low base, Competitive intensity in BOTs segment remains low, and  BS improvement will lead to further re-rating.

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