IRB Infrastructure Developers Ltd. - PINC Visit Note

Revisiting traffic & tariff estimates

We revise our traffic growth, toll rate increase and revenue expectations for BOT projects post our visit with the management of IRB Infra. We have revised our traffic growth assumption for the initial phase to 7% from 8%, while maintain 5% and 3% for Phase II & III resp. The net impact of our exercise is minimal at 3.5% increase in target price largely due to roll over of valuation and introduction of new project.

Realigning costs dents operational BOT profit

We bring down revenue estimates by 0.5% and profits by 17.5% for operational BOT projects, which is largely due to increase in interest cost of Surat-Dahisar & increase in O&M cost for Mumbai-Pune Project.

Higher project cost of BOT under execution escalates interest and depreciation cost

Revenue for under construction BOT project has been revised up by 9.8% and 10.9% for first and second year resp. PAT lowered by 34.5% and 21.5% for first and second year resp. due to increase in project cost estimates leading to higher interest and depreciation cost.

Surat Bharuch debt has been repaid at Rs5.9bn.

Introduce Tumkur-Chitradurga valuation…

We have introduced the recently bagged Tumkur-Chitradurga project into our valuation and expect revenue to start from FY12, traffic growth of 7% and toll rate hike of 5% (3% fixed+40% of inflation). We have valued the project at Rs7.2 per share.

VALUATIONS & RECOMMENDATION

The net impact of our exercise is 3.5% increase in target price at Rs282 vs previous target of Rs272, with BOT projects contributing Rs159, construction business at Rs98, land is valued at Rs10 and cash balance with the company at Rs15. However we have not factored in Sindhudurg airport and Kolhapur hotel project.

Source : Equity Bulls

Keywords