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Research
Buy IVRCL Infra & Projects - Bumpy execution story continues - Elara Capital
Posted On : 2010-08-11 09:39:43( TIMEZONE : IST )
- IVRCL Infra & Projects
- Rating : Buy
- Target Price : INR209
- Upside : 23%
- CMP : INR170 (as on 10 August 2010)
Poor operational show following a phenomenal Q4
IVRCL put up a disappointing performance with sales remaining flat at INR11.1bn owing to issues in three major projects, resulting in a loss of INR2.5bn (in revenues) during the quarter. While it lost revenues of INR750mn and INR1.25bn in the NATRiP project in MP and IOTL Utkal tankage project respectively due to delays in release and approval of drawings by the appointed consultants, the shortfall of the remaining INR500mn was the result of delayed payments by the AP government which forced the company to slow down its execution pace.
Operating margins at 9.1% expanded marginally by 13bps YoY thanks to savings from consumption of materials. Lower other income (down ~77%) coupled with higher interest charges (INR453mn) further dampened the profitability as net profits dipped by 20.4% YoY to INR281mn.
Outlook continues to brighten for IAHL
IVRCL Assets & Holdings Ltd (IAHL) posted revenues of INR1bn (vs INR3mn in Q1FY10) and a net loss of INR50mn (vs INR36mn in Q1FY10) during the quarter. Of the current asset portfolio worth INR111.5bn, two road BOT projects namely the Jalandhar Amritsar and the Salem Tollways along with the Chennai Water Desalination project have commenced operations. All the four BOT projects (3 roads, 1 in water) transferred from IVRCL are expected to yield INR10mn/day in terms of revenues by end-FY11. IAHL targets revenues of INR10bn in FY11 including the real estate land bank monetization of INR700-750mn.
Maintain estimate, Buy rating with a price target of INR209
Backed by the revenue visibility emanating from the present order backlog and incremental orders till date in Q1FY11 (~INR32bn), we expect IVRCL to post a revenue and net profit CAGR of 21.3% and ~22% respectively over the period FY10-12E on a stand-alone basis. We maintain our Buy recommendation on the stock with a price target of INR209.
