Neutral IRB Infrastructure; target of Rs 33: Motilal Oswal

Motilal Oswal's research report on IRB Infrastructure

IRB Infrastructure (IRB)’s revenue grew 30% YoY to INR17.5b in 2QFY24 (14% above our estimate). EBITDA margin came in at 45.5% (down 400bp YoY, below our estimate of 48% margin). EBITDA grew 19% YoY to INR7.9b (9% beat). High other income was more than offset by increased losses in JV/associates and higher interest expenses. As a result, APAT grew 12% YoY to INR1.0b, in line with our estimate. Construction revenue grew 36% YoY to INR11.8b, while BOT revenue stood at INR5.7b (up 19% YoY). The order book stood at ~INR327b (excl GST) at 2Q end. The O&M order book stood at INR251b and the construction order book stood at INR75.5b. IRB has emerged as the preferred bidder for ToT bundle 12, with an upfront payment of INR44b. The project entails tolling and O&M activities on the ~316km (~1,267 lane km) stretch for a revenue-linked concession period of 20 years. This project will add ~INR39b to IRB’s order book, including ~INR6b for EPC and an O&M order book of ~INR33b. The project is expected to generate positive cashflow from its first year of operations.

Outlook

A strong order book of INR327b as of Sep’23 and the commencement of its Hyderabad ORR project provide healthy revenue visibility. The tender pipeline remains strong, driven by BOT projects, which implies strong order inflows in the remaining part of FY24. We expect a revenue CAGR of ~13% over FY23-25. We marginally increase our APAT estimate for FY25 by 3%. We maintain our Neutral rating with SoTP-based TP of INR33 per share.