Maintain 'buy' on IRB Infrastructure - TP lowered to Rs.171 - Geojit BNP Paribas Financial Services

- Buy rating on IRB Infrastructure is maintained but, the target price has been lowered to Rs.171 from Rs.182 earlier. Reduction in target price is on the basis of lower traffic growth assumption of 5% from 7% earlier.

- There are no major surprises in the 3QFY13 results. Adjusted PAT was 4% lower yoy and lower than the street's estimates.

- Toll collections were below expectations on its key stretches and the traffic growth assumption has been lowered to 5% from 7%.

- Maintain 'buy' rating subject to pending investigations against its employees.

- It is expected that BOT ordering activity to pick up in FY14. With a decline in competitive intensity, IRB would emerge as a strong contender among its peers.

- However, negative media publicity and pending CBI investigations against certain employees of the company including its Chairman would continue to be a drag on the stock.

- Risks to the target price include lower than expected traffic or toll increases, slower execution, higher than expected capex, continued negative publicity and adverse outcome of the pending CBI investigation.

- Frequent negative publicity in the media continues to be a drag on the stock and a major risk to our recommendation.

- While the service tax issue seems to be heading in favour of the company (the Appellate Tribunal issued a stay on the earlier demand), the pending murder investigation by the CBI against IRB's employees, including its Chairman, continues to be a major investment risk.

- We are unable to quantify these risks at present. We advise investors to consider these risks before making their investment decision.

Source : Equity Bulls

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