StockMarket Update on IRB Infrastructure for 1QFY2012 with a Neutral recommendation.
IRB Infrastructure (IRB) on a consolidated basis reported a strong performance on all fronts, which was in line with our estimates, but well ahead of consensus. Top-line growth was led by a whopping 80.9% yoy jump in C&EPC revenue. The bottom line also reported impressive performance on account of robust top-line growth, higher other income and lower tax provision (24.6%).
Impressive show on all fronts: IRB reported robust top-line growth of 56.5% yoy to `801.3cr (`512.0cr), marginally ahead of our estimate of `766.6cr. This stellar performance was led by stupendous 80.9% yoy growth in the C&EPC segment’s revenue to `597.2cr (`330.1cr), against our expectations of `533.5cr. We believe the construction segment has posted robust numbers due to significant contribution (50–60%) from the Surat Dahisar project, which is nearing completion, and pick-up in execution of other under-construction projects. IRB’s operating margin came in at 41.1% (44.8%), slightly lower than our estimate of 42.3%, due to higher contribution from the low-margin C&EPC segment. Interest cost come in at `117.4cr (`66.1cr), up 77.6% yoy because of increased debt (`380cr–400cr) and MTM loss of `8cr–10cr. IRB reported healthy yoy growth of 19.1% to `180.0cr (`151.2cr) and 14.2% to `134.2cr (`117.5cr) at the PBT and PAT levels, respectively, against our estimates of `168.1cr and `117.8cr.
Outlook and valuation: NHAI has begun FY2012 on an aggressive note by awarding projects of ~1,000kms in April and May 2011. This is in-line with NHAI’s revised target of ~11,000kms for FY2012, an increase of whopping 117% over FY2011. IRB, being one of the market leaders, is expected to gain from the same. Further, IRB has a robust order book (excluding O&M orders) of `11,171cr (6.7x FY2011 construction revenue), which lends high revenue visibility for the next two–three years. However, owing to the recent run-up in the stock price (IRB’s stock has increased by ~16.1% in the last one month as against a return of 5.7% by the Sensex), we believe the upside from current levels is limited and, hence, we recommend Neutral.
