IL&FS Transportation Networks Ltd - Interest costs impact profitability - Antique Stock Broking

Results highlights

Consolidated revenues rise by 45%

IL&FS Transportation Networks Ltd. (ITNL) reported a 45% surge in consolidated revenues to INR15.8bn, led by higher revenues across all the segments, viz. construction, Elsamex and BOT, which rose by 42%, 27% and 63% to INR10.7bn, INR2.1bn and INR2.1bn respectively.

Higher construction expenses impacts margin

EBIDTA margins contracted by 80bps to 29.5% on account of higher construction expenses. However, the same improved by 650bps on a QoQ basis on back of improvement in profitability of construction segment. While EBIDTA surged by 41% YoY to INR4.7bn, net profits rose by only 5% to INR1.2bn on account of higher interest expenses.

Order backlog at INR107.4bn

As on June 2012, ITNL's order backlog stood at INR107.4bn against INR120.6bn in March 2012. The order book coverage of 2.5x its TTM construction revenues provides revenue visibility for the next 2.5 years.

Valuations

At the CMP of INR168, the stock trades at a P/E and EV/EBIDTA of 5.5x and 8x discounting its FY14e earnings.

We maintain our BUY rating and a target price of INR224, providing an upside of 33% from current levels. Our target price is based on SoTP methodology where road projects are valued on DCF basis (INR142/share), EPC business of standalone company on P/E multiple (INR52/share) and non-Road portfolio on P/B multiple (INR31/share).

Source : Equity Bulls

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