Maintain 'BUY' on IL&FS Transportation - Entry into China, it's a one off opportunity - PINC Quick Bite

IL&FS Transportation (ITNL) has been selected as the preferred bidder for 49% stake in Yu He Expressway Company Ltd by Chongqing Expressway Group. The relatively small size of the project, non-strategic fit and the requirement to fund Rs7.8bn for a minority stake of 49%, would limit any near term benefits to ITNL. Finer details of the project are awaited. We maintain BUY.

- To be in China…not a strategic initiative
- Funding through debt
- The project features…

PINC View - VALUATIONS & RECOMMENDATION

We maintain our BUY rating with a SOTP based target price of Rs224, we have not valued the MP border check post and Chhattisgarh project, the total value of the BOT projects is Rs103 (Rs20bn), EPC business has been valued at 4.5x (asset light model) at Rs106 per share and Elsamex at Rs14 per share (1x equity invested).

Source : Equity Bulls

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