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India : Emkay maintains `Accumulate` on IRB Infrastructure.

Emkay has recommended `Accumulate` on IRB Infrastructure with a price target of Rs 310 as against the market price (CMP) of Rs 257 in its report dated July 28, 2010. The broking house gave the following investment rationale:

BOT - star performer in the overall revenue growth of 23.6%

Revenues for the quarter at Rs 5.1 billion (our est-Rs 5.78 billion) have grown by 23.6%, driven by 27% growth in the revenues of BOT segment, and growth of 21.6% in construction segment. BOT revenue growth was driven by new concessions of Bharuch- Surat and revenue traction at Thane Bhiwandi, NKT, Surat-Dahisar & Pune Nashik projects. Growth in construction segment was driven by peak execution at Surat Dahisar and Kolhapur project. We expect the construction vertical to pick up traction in H2FY11E, led by execution on 4 new BOT projects (TPC-Rs 43 billion) bagged in FY10.

EBIDTA growth continues unabated at 50% yoy led by construction segment

EBITDA at Rs 2.49 billion was marginally better than our estimates of Rs 2.47 billion even after a lower than expected revenue growth due to significant expansion in the construction margins. Overall EBIDTA grew by 50% yoy, much faster than the topline growth of 23.6% as the construction segment witnessed a 1,220 bps expansion to 24.2% in the EBITDA margins. Construction margins expanded due to peak execution at the Surat Dahisar and Kolhapur project as well as a low base effect (Q1 last year construction margins at 12.2% were affected by mobilization cost and execution was in the initial phases at Surat Dahisar and Kolhapur projects). Consequently construction EBITDA grew at 144.7% yoy to Rs 752 million. BOT segment also showed a resilient performance with the EBITDA margins expanding 104 bps to 86.2%, accompanied with a revenue growth of 27%, driving BOT EBITDA by 28.5% to Rs 1.74 billion. Consequently, overall EBITDA margin excluding the other income improved by 856 bps to 48.7%.

APAT growth at 25.8% driven by lower interest cost

Reported PAT includes Rs 150 million of dividends received by IRBPL (100% subsidiary of IRB and which further holds 26% stake in MIPL). Interest cost has fallen by 18.8% sequentially to Rs 661 million on account reprising of expensive debt at Surat Dahisar (12.5%) and Mumbai Pune (12.5%) project and repayment of Rs 6.0 billion expensive long term debt at 12.5% at Bharuch Surat was replaced by leveraging the parent company balance sheet at attractive rates. Thus, resulting in overall APAT growth of 25.8% yoy.

Copyright : Euclid Infotech Pvt. Ltd.

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Date:Jul 28, 2010
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