IRB Infrastructure Developers' Q4FY19 results (Outperformer) - Achieved appointed date for Hapur Moradabad project
Q4FY19 result highlights
- IRB Infrastructure Developer’s Q4FY19 consolidated revenues came in at Rs19.5bn, growth of 41% yoy. EPC revenues increased by 58% yoy to Rs14.1bn (vs est of Rs12.4bn) while BOT revenues grew by 9% to Rs5.4bn. FY19 revenues came in at Rs67bn, a growth of 18% yoy. EPC revenues grew by 19% to Rs46.3bn and BOT revenues grew by 15% to Rs20.8bn.
- IRB Infrastructure Developers’ (IRB) Q4FY19 EBITDA were in line with estimates at Rs7.6bn (est of 7.5bn) despite lower margin in EPC segment (20% vs est of 23%) due higher EPC revenues. EPC margins were lower due to low margin utility shifting and scoping work. Overall EBITDA margin was 39% for 4Q FY19, decline of 870 bps yoy due to higher %age of EPC revenues and lower EPC margins.
- Sharp increase in interest cost in under construction BOT projects led to miss in our earnings estimates. PAT declined 13%yoy to Rs2.1bn ahead of our estimate of Rs1.7bn.
- Order backlog as on Mar 19 stood at Rs111bn (2.4x FY19 revenue). OB declined in FY19 due to lack of new wins of road projects.
- IRB has guided for 30% yoy growth in revenues and 20% in EBITDA for FY20. Further, EPC revenues are expected to grow at 30-35%yoy and 20-25% yoy growth in toll revenues aided by new BOT projects.
- Recently, the company received appointed date for Hapur Ahmedabad (Cost - Rs33bn). During the quarter, it received appointed date for Puducherry to Poondiyankuppam (project cost – Rs13bn)
Key positives: Appointed date for Hapur Moradabad project
Key negatives: Delay in appointed date for two HAM projects
Impact on financials: Maintain our FY20E estimates
Valuations & view
IRB’s foray into HAM segment and its robust order book enhances visibility and sustainability of its EPC business. Two projects worth RS46bn has achieved appointed date which will aid in revenues for FY20E and FY21E. With increasing contribution from HAM projects (at 15-17% EBITDA margin), IRB’s EPC margins should converge with its peers in 3-4 years. We value its EPC business at Rs56bn and our overall SOTP based price target for IRB is Rs267. We maintain Outperformer rating on the stock.
IRB Infrastructure Developers is a infrastructure projects development group based in India. Co. undertakes development of various infrastructure projects in the road sector through several Special Purpose Vehicles. Co. executes projects under the Public Private Partnership (PPP) mode. Co.'s focus is developing highway infrastructure involving construction, operation and maintenance of highways, under Build-Operate- Transfer (BOT) mode. Co. places bids for BOT contracts for national and state highways development projects. Along with its subsidiaries, Co. has constructed, operates and maintains approximately 9,295 lane kms of road length in India.
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