Friday, January 29, 2010

IRB; Margins positively surprise; Tgt: Rs 250

IRB Infrastructure Developers Ltd

 

Margins positively surprise


ACCUMULATE

 

CMP: Rs 245                                     Target Price: Rs 250


IRB's Q3FY10 net profit (after minority interest) at Rs914.4 (+139% yoy) mn is above expectations (Rs635 mn) on account of higher than expected EBIDTA margins in Construction as well as BOT segment and lower than expected tax rate. Revenues for the quarter grew by 81% yoy to Rs4.33bn (our estimates Rs4.21bn), driven by 70.8% growth in construction revenues (Rs2.3 bn) and 94.3% growth in BOT revenues (Rs2.03 bn). BOT revenue growth was driven by addition of two new concessions of Surat Bharuch & Surat Dahisar where as growth in construction segment was driven by peak execution in new projects like Surat Dahisar, and Kolhapur project. EBIDTA for the quarter at Rs2.27 bn (our estimates- Rs2.01bn) grew 123.7% yoy, driven by 105.8% growth in BOT EBIDTA and staggering 248.3% growth in Construction EBIDTA. 

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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