IRB Infrastructure Developers - Elara

Rating : Buy
Target Price : INR158
Upside: 28%
CMP : INR124 (as on 15 May 2013)

'The Black Swan'

Key takeaways from the management call

- Net daily toll collections have inched higher to INR29.5mn with additions of MVR Infra (INR1.6mn/day) and Ahmedabad Vadodara (INR3.2mn/day) in FY13. While collections on MVR Infra are in line with projections, initial collections on Ahmedabad Vadodara are ~22% below estimates. The management expects the diverted traffic to pick up considerably in FY14 as construction works on NH8 gets in full swing; this coupled with toll hike on the expressway in Jul'13 should enable meeting estimated collection in FY14.

- Traffic on couple of marquee assets in Surat Dahisar and Bharuch Surat has picked up significantly with the respective SPVs registering 12.3% and 18.4% YoY leap in toll collections during the quarter. The same may be attributed to substantial completion of constructions works on the Thane Ghodbunder front in Maharashtra. Five projects are expected to achieve CoD in FY14 viz. IRDP Kolhapur (PCC issued, to start tolling in Q1), Talegaon Amravati (95% complete, commenced partial collection since Apr'13), Jaipur Deoli (95% complete), Amritsar Pathankot (80% complete) and Tumkur Chitradurga (75% complete).

- Having invested INR30bn as equity across its portfolio, IRB looks at investing an additional INR18bn (majorly across Goa Kundapur and Ahmedabad Vadodara) over the next couple of years via internal accruals. The equity commitment for FY14 stands at INR2.5bn. Present backlog at INR84.3bn provides revenue visibility for 10 quarters; ~67% of order book emanates from the twin projects of Goa Kundapur and Ahmedabad Vadodara. The management expects to receive the requisite E&F clearances and achieve FC on Goa Kundapur latest by end-Q2FY14.

With upside possibility to earnings lined up emanating with faster than anticipated ramp up on the twin large fresh jobs in the existing backlog, we maintain 'Buy'. The changed dividend policy of distributing 20% of annual profits to shareholders ensures attractive yield prospects.

Source : Equity Bulls

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