Stock Market Result Update on IVRCL Infrastructure for 2QFY2012

Stock Market Result Update on IVRCL Infrastructure for 2QFY2012 with an Accumulate recommendation and a Target Price of `59 (12 months).

IVRCL reported a mixed set of numbers for 2QFY2012, with in-line performance on the revenue front; however, better-than-expected performance at EBITDAM level and lower tax rate led to higher-than-expected earnings. Order inflow for 1HFY2012 was commendable at `8,000cr (including L1 projects), given the current scenario. The company’s order book stands at `25,500cr (4.5x FY2011 revenue, including L1 projects of `5,600cr). During the concall, management cited that the company is in the advanced stage of selling its Noida land parcel (book value ~`415cr) and is expecting to close the deal in the next couple of quarters. We are tweaking our revenue estimates downwards for FY2012 to factor in the poor performance in 1HFY2012. We maintain our Buy view on the stock.

Better-than-expected results; Positive news flow awaited: IVRCL reported a 2.7% yoy decline in its top line to `1,046.1cr (`1,075.0cr), in-line with our estimate of `1,075.0cr. On the EBITDAM front, the company posted flat margin of 9.0% (8.9%) on a yoy basis, against our estimate of 8.0%. Interest cost came in at `65.2cr (`48.0cr), a jump of 35.8% yoy/3.9% qoq and was in-line with our estimate. IVRCL reported a 65.0% yoy decline in its earnings to `8.1cr (`23.3cr), against our estimate of a 95.3% decline due to better-than-expected EBITDAM and lower tax outflow.

Outlook and valuation: Management has chalked a plan to reduce the company’s debt levels by the end of FY2012. In-line with this, IVRCL is looking to amalgamate its BOT assets back to IVRCL Ltd. and sell its stake in operational road BOT projects. Also, management is in the advanced stage of monetizing land parcels. We believe reduction in IVRCL’s debt levels would lend a strong impetus to its standalone earnings growth and, thereby, act as a catalyst for stock price movement. We maintain our Buy recommendation on the stock with an SOTP target price of `59.