Buy IRB Infrastructure Developers; target of Rs 134: Ventura Securities

Ventura Securities report on IRB Infrastructure Developers

Since our past reportson IRB Infrastructure Developers Ltd (IRB) on Oct 14, 2022 (at a price of INR 22 with a TP of INR 73) and Nov 6, 2023 (at a price of INR 35 with a TP of INR 94), the stock rallied to its peak price of INR 72 on Feb 5, 2024, before declining to the CMP of INR 59. We are of the opinion that this downturn is solely a result of the broader market correction affecting midcap stocks, and IRB possesses considerable growth potential stemming from its increased number of free cash flow generating projects. Our conviction in the growth story is further emboldened by the fact that Cintra (an affiliate of Ferrovial) is looking to acquire a shareholding of 24% in IRB Infrastructure Trust (IRBTrust) from GIC. The valuation exercise undertaken for this transfer values the initial 10 projects of IRBTrust at INR 190 bn. This raises the value of IRB’s share of 51% to INR 97 bn for 10 assets. In addition, IRB has submitted claims to the NHAI concerning the Ahmedabad-Vadodara project for claim of competing road. The order has been reserved and awaiting final clearance from regulatory bodies. These claims have not been factored into our forecasts and represent an upside risk to our estimates.

Outlook

We value IRB on a SOTP basis for a price target of INR 134 per share and recommend a BUY at a CMP of INR 61.4 per share, representing an upside potential of 118.2% over the next 24 months.