MOSL: IRB INFRASTRUCTURE (Neutral)-Better-than-expected performance led by execution pick-up
IRB Infrastructure: Better-than-expected performance led by execution pick-up
(IRB IN, Mkt Cap USD0.7b, CMP INR139, TP INR155, 12% Upside, Neutral)
- Operating performance exceeds expectations: IRB’s revenue increased by a healthy 38% YoY to INR17.9b (ahead of our estimate of INR15.4b), supported by strong growth in construction revenue (+51% YoY to INR12.5b) and an increase in BoT revenue (+16% YoY to INR5.3b). Operating profit grew 13% YoY to INR7.6b (ahead of our estimate of INR7.2b), with margin shrinking 950bp YoY to 42.5% due to contraction in Construction margins (24.5% v/s 29.4% in 3QFY18). Adjusted profit at INR2.2b (-13% YoY) was ahead of our estimate of INR2.0b.
- Toll revenue from continuing projects muted; key Mumbai-Pune project impacted by high base YoY: Toll revenue from continuing projects came in at INR5.0b v/s INR4.8b in 3QFY18 (+5.4% YoY). New projects contributed another INR551m, taking the total toll revenue for the quarter to INR5.5b (+16% YoY). Traffic growth at its key Mumbai-Pune project stood muted (+1.7% YoY: INR2.5b), given the high base of 3QFY18. Traffic at Agra-Etawah project also declined by 19% YoY due to (a) diversion of traffic to Agra-Lucknow Highway (has started tolling at a concessionary rate of 75%), (b) ongoing construction on the 20km bypass stretch, and (c) few flyovers that impacted traffic flow on the project. IRB expects toll collection to improve in the coming quarters.
- EPC revenue meaningfully ahead of estimates: EPC revenue grew 48% YoY to INR12.8b, with EBIDTA growth of 14%YoY to INR3.2b. EPC performance is likely to improve substantially over FY18-20, given the robust order backlog of INR81.6b in HAM/BoT category, which should start contributing meaningfully to revenue from FY20. Order book is robust at INR122b and is expected to be executed over the next two years, ensuring revenue CAGR of 34% (FY18-20) and earnings CAGR of 17%.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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