Tuesday, May 26, 2009

[Investors Please Listen] IRB Infrastructure Developers Ltd


 

Q4FY09 results – below expectations


ACCUMULATE

 

CMP: Rs142                                     Target Price: Rs145


IRB Q4FY09 results were below our estimates primarily on account of higher operating costs. Revenues for the quarter increased by 34.3% qoq to Rs3.21bn (our estimate Rs3.15bn) driven by 41.3%qoq increase in construction revenues while BOT revenues were up 19.8% sequentially. Operational costs during the quarter jumped up by 45.8% qoq to Rs2.0bn as the company incurred higher periodic maintenance costs during the quarter which were schedule to be incurred over FY10. Resultant, EBIDTA for the quarter grew at a lower pace of 18.7% sequentially to Rs1.20bn while EBITDA margin declined by 577 bps. EBITDA margins for the construction business were up 422bps to 18.2% while BOT EBITDA margins were down 1412bps. We expect construction EBITDA to improve with addition of high margin Surat Dahisar construction project and falling commodity prices. Net profit for the quarter was at Rs422.4mn which was below our estimated Rs483mn. We are downgrading our FY10E earnings by 5.7% to Rs11.6 mainly on account of lower than estimated contribution from the Surat Dahisar project and higher costs in the construction business. We believe IRB is an ideal play on India's continued focus on developing road infrastructure through PPP model. We also take comfort from the fact that post financial closure of Surat Dahisar project, the company does not require significant funds for executing its projects. The lower interest rate scenario shall add further fuel to stock outperformance. At CMP of Rs142, the stock is trading at 11.6x FY10E earnings. We are revising our rating on the stock from BUY to ACCUMULATE with a revised price target of Rs145.


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