Hold IRB INFRASTRUCTURE DEVELOPERS LTD - PINC Result Review

EPC Margin Surprise

IRB reported above expected PAT at Rs1,175mn against our expectations of Rs943.5mn, sales was inline at Rs5.1bn against our expectation of Rs4.9bn. The surprise factor coming from a huge increase in Ebidta margin for the EPC division at 24.7%. We maintain our HOLD rating with a target price of Rs282.

Surprisingly high EBIDTA margin for EPC division

The construction division reported a growth of 20% in total income to Rs3,301mn but PBITD margin increased substantially to 28.8% against 18.4% last year. Adjusted for other income EBITDA is likely to be at 24.7% against 16.3% reported for FY10. As a result PBIDT increased to Rs952mn vs Rs505mn (YoY) an increase of 88.4%. The increase in margin is largely led by the Surat-Dahisar which constituted about 75%-80% of the business and a high component of other income @ ~Rs150-180mn. Better machinery, reduction in material cost against the build-up cost while tendering and a lower OH per km (239km) project are the factors leading to improved margins. The sustainable weighted avg margin for the EPC business is 18-20%.

VALUATIONS AND RECOMMENDATION

We have valued the company on SOTP basis at Rs282, with Rs159 for BOT projects, Rs98 for construction business, land valued at Rs10 and cash on book at Rs15. We maintain our 'HOLD' recommendation on the company, however we have not factored in Kolhapur Hotel project and Sindhudurg Airport.

Source : Equity Bulls

Keywords