IRB Infrastructure Developers Ltd
Upgrading earnings & price target
ACCUMULATE
CMP: Rs 245 Target Price: Rs 250
IRB Q2FY10 net profit at Rs708 (+72% yoy) mn is above expectations (Rs558 mn) on account of higher than expected revenues in Construction segment due peak execution in new projects like Surat Dahisar and Kolhapur project. Revenues for the quarter grew by 76.5% yoy to Rs3.56bn (our estimates Rs2.85bn), driven by 98.7% growth in construction revenues (Rs2.01 bn) and 49.2% growth in BOT revenues (Rs1.65 bn). EBIDTA for the quarter at Rs1.75 bn (our estimates- Rs1.48bn) grew 75% yoy, driven by 55% growth in BOT EBIDTA and staggering 156.5% growth in Construction EBIDTA. We have upgraded IRB consolidated earnings estimates by 6.3% to Rs14.1 driven by upgrade in earnings estimates of construction business by 5% and that of BOT business by 8.3%. Overall we expect IRB to register revenue growth of 82% and earnings growth of 63% over FY2009-11E. We have also upgraded IRB fair value to Rs250, on the back of earnings upgrade, rollover of our target year for BOT business to FY2011, and upgraded in our target PER multiple from 10X to 12X for construction business. Further we have added the terminal value of the firm which is based on FCFE available to the firm in the year FY2025.
IRB, an ideal play on India's continued focus on developing road infrastructure through PPP model, is on a verge of steep growth trajectory with expected earnings CAGR of 63%. Also the proposed fund raising exercise (enabling resolution of Rs12 bn) will equip IRB with a war chest of Rs65-70 bn to capitalize on huge opportunity in road BOT space in India and also significantly scale up its construction business. These two factors we believe will continue to fuel stock outperformance - Maintain our ACCUMULATE rating -price target Rs250.
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