IRB Infra - Visit Note – Nirmal Bang Institution Desk

We recently paid a visit to three major projects of IRB Infrastructure Developers (Dahisar-Surat, Bharuch-Surat and Vadodara-Ahmadabad projects) and met the project managers/toll operators there to get an update on the execution of the projects, the current trend in traffic growth as well as future growth prospects. Our interaction with the project managers indicated that initial work on the ongoing Vadodara-Ahmedabad project is ahead of schedule. However, the toll managers have witnessed subdued growth in traffic at two operational road projects (Dahisar-Surat and Bharuch-Surat projects), primarily due to overall weak economic activity. The company has reported 1QFY14 result with net sales of Rs10.3bn and EBITDA of Rs4.6bn, above our/Bloomberg consensus estimates by 3%/8%, respectively, mainly driven by higher growth in EPC revenue compared to estimates. However, RPAT at Rs1.3bn was 2%/7% below our/Bloomberg consensus estimates due to higher interest costs and tax provision at a higher rate (increase in tax surcharge).

We have cut our earnings estimates for FY14/FY15 by 22%/36%, respectively, to factor in moderation in traffic growth estimates, subdued EPC revenue growth and likely prolonged high interest rate regime. We have also cut our target price on the stock from Rs181 to Rs106, but retained our Buy rating on It.

Source : Equity Bulls

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