Views on IL&FS Transportation Networks Ltd 4QFY2016 Results: Angel Broking

Views of Mr. Santosh Yellapu (Sr. Equity Research Analyst - Infrastructure, Angel Broking) on IL&FS Transportation Networks Ltd 4QFY2016 Results:

Strong execution supports 4QFY2016 performance

"IL&FS Transportation Networks Ltd (ITNL) reported a top-line growth of 78.2% YoY to INR 2,548cr for 4QFY2016. Better-than-expected revenue booking across the construction segment, fee income from new projects and commencement of Baleshwar-Kharagpur and Sikar-Bikaner BOT projects, in our view, led to such strong revenue growth. On the operating front, ITNL reported an EBITDA margin of 30.5% for the quarter vs 26.5% in 4QFY2015. Such expansion in the YoY EBITDA margin could be owing to higher contribution from high-margin toll and fee income based business. During the quarter, ITNL reported a profit of INR 80cr, again ahead of our estimates; PAT margins were reported at 3.2%, lower than 5.4% as reported in the corresponding quarter a year ago. Despite EBITDA margin expansion, 55.7% YoY increase in interest expenses and higher depreciation expenses contained the PAT margin for the quarter.

In 4QFY2016, ITNL in association with its JV partner Elsamex reported an Ethopian O&M order win amounting to INR 1,525cr. Also in 1QFY2017, ITNL has won an INR 530cr Middle East order for the development of Commercial Area and Automated Car Parking for a period of 30 years. On factoring in the order win, ITNL ended the quarter with an order book of ~INR 14,612cr. With the recent wins, the company now looks to be in a comfortable position as far as the order book is concerned. Over the last few quarters, ITNL stock has been under pressure on account of its highly levered balance sheet (consol. D/E at 4.13x) and lack of visibility in terms of projects getting commenced. However, on considering (1) ITNL's successful rights issue of INR 740cr (in 3QFY2016), (2) improved visibility on 7-8 BOT projects, which are expected to commence operations in next 12 months, and (3) recent debt re-financing initiatives, we expect the company's financials to see sharp improvement, going forward. This when coupled with ongoing strategic initiatives being implemented draws a favourable picture for the company and we are comforted that the stock is poised for re-rating from here-on. We maintain our BUY rating on the stock with price target of INR 93."

Shares of IL&FS Transportation Networks Ltd was last trading in BSE at Rs.71.15 as compared to the previous close of Rs. 71.85. The total number of shares traded during the day was 26733 in over 475 trades.

The stock hit an intraday high of Rs. 72.3 and intraday low of 71.1. The net turnover during the day was Rs. 1919493.

Source : Equity Bulls

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