Maintain 'BUY' on IRB Infrastructure – TP Rs.182 - Geojit BNP Paribas

- IRB reported in-line PAT for Q2FY13. Although construction earnings were below estimates, lower-than-expected interest in the BOT segment offset this shortfall.

- Traffic growth in the BOT segment was weaker than expected for the second consecutive quarter, which is a concern.

- BOT ordering activity is expected to pick up in Q3FY13. We believe that IRB is competitively placed among its peers in this segment.

- However, negative media publicity and pending CBI investigation against certain employees of the company, including its Chairman, will remain a drag on the stock.

- Recently, there were reports in the media about IRB having nexus with politicians and it was accused of accepting undue favours.

- Separately, the company's counsel was raided by the CBI, possibly in relation to the pending murder investigation, renewing fears in the minds of investors of adverse actions against the company.

- These risks cannot be quantified at this point of time and investors are advised to consider these risks before making their investment decision.

- Buy recommendation is maintained on IRB Infra with a TP of Rs.182 over a period of one year.

- Downside risks to Target Price: Lower-than-expected traffic or toll increases, slower execution, higher-than-expected capex, continued negative publicity and adverse outcome of the pending CBI investigation.

Source : Equity Bulls

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