IL&FS Transportation Networks - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, on a consolidated basis, IL&FS Transportation Networks Ltd (ITNL) posted a strong performance at the top-line and EBITDAM fronts. However high interest cost led to a muted growth at the bottom-line level. The robust revenue performance was owing to engineering and construction (E&C) revenue growth of 42.4% on a y-o-y basis to Rs.1,072cr and due to the growth in toll and annuity income which grew by 63.4% yoy to Rs.205cr. On a standalone basis, ITNL reported a revenue growth of 47.5% again led by E&C revenue growth of 51.4% to Rs.556cr and fee income increase of 37.5% to Rs.192cr.

High interest cost overshadows robust revenue performance: The company's revenue for the quarter came in at Rs.1,580cr, registering a 44.5% y-o-y growth, which was 6.3% higher than our estimate. The EBITDA margin for the quarter stood at 29.5%, a fall of 80bp yoy and an improvement of 650bp qoq. ITNL's interest cost during the quarter grew by 76.8% yoy / 9.2% qoq to Rs.252cr, ahead of our expectation of Rs.226cr. On the earnings front, ITNL reported a muted growth of 5.2% on a y-o-y basis to Rs.122cr on the back of higher interest cost and tax expense (41%).

Outlook and valuation: During last quarter, ITNL bagged road BOT projects worth Rs.4,948cr thus putting the concern on order inflow to rest. Currently its order book stands at Rs.10,743cr (order book of 2.9x FY2013E standalone revenue) providing revenue visibility. During the quarter, ITNL's debt to equity has increased to 1.41x from 1.40x and to 3.98x from 3.70x on standalone and consolidated basis respectively. We have valued ITNL on a sum-of-the-parts (SOTP) basis by assigning 4.5x EV/EBITDA to its standalone business and have valued its investments on DCF/Mcap/BV basis on FY2014E to arrive at a target price of Rs.232/share. Hence, we maintain our Buy view on the stock.

Source : Equity Bulls

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