Hold IRB Infrastructure; target of Rs 240: ICICI Direct

ICICI Direct's research report on IRB Infrastructure

IRB Infrastructure’s (IRB) topline grew robustly by 19.7% YoY to Rs 1816.9 crore (our estimate: Rs 1478.0 crore) led by stellar growth of 44.7% YoY in construction revenues to Rs 1320.9 crore (our estimate: Rs 975.3 crore). However, with six BOT assets transferred to InVIT, toll revenue fell 17.8% YoY to Rs 496.0 crore (our estimate: Rs 502.7 crore) EBITDA margins declined sharply by 600 bps YoY to 45.0% (our estimate: 48.7%) due to a change in the revenue mix PAT grew robustly by 30.8% YoY to Rs 237.9 crore (our estimate: Rs 214.4 crore) due to lower depreciation expenses (Rs 181.7 crore in Q1FY18 vs. Rs 220.7 crore in Q1FY17) The board has declared an interim dividend of Rs 2.5/ share.

Outlook

IRB’s construction revenues are expected to grow strongly, with strong execution ahead. However, toll revenues from Ahmedabad-Vadodara project continues to remain weak as the project has been impacted due to diversion of traffic to a parallel state road. Going forward, we would look to closely monitor this project where traffic growth remains the key. Consequently, we continue to maintain our HOLD recommendation on the stock with a revised SOTP based target price of Rs 240/share.