Buy IVRCL Infrastructure - Motilal Oswal

IVRCL Infrastructure (IVRC IN; Mkt Cap USD0.4b, CMP Rs72, Buy)

IVRCL's 3QFY11 revenue was Rs14b (up 20% YoY), above our estimate of Rs13.6b (up 15% YoY).

Execution picked up, resulting in the best YoY revenue growth in the past eight quarters. EBITDA of Rs1.4b (up 21% YoY), was in line with our estimate.

We cut FY11 and FY12 revenue estimates by 2% and 7% respectively due to execution concerns.

We have cut our FY11 earnings estimates by 16% and for FY12 by 26% largely due to higher interest expenses.

The order book as at December 2010 was Rs242b, from Rs236b in 2QFY11 and order intake was Rs32b in 3QFY11, a decline of 10% YoY.

At its current price, the stock trades at 4.5x FY12E earnings, after adjusting for Rs31/share assigned to its subsidiaries, IVRCL Assets and its holding in Hindustan Dorr Oliver. We believe current valuations factor in key negatives. Improvement is earnings growth in 4QFY11 will re-rate the stock. We upgrade the stock to Buy with a revised price target of Rs115 (earlier Rs162), an upside of 59%.

Source : Equity Bulls

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