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MOSL: IRB INFRASTRUCTURE (Neutral)-Better-than-expected performance-lower executable order book to impact growth

IRB Infrastructure: Better-than-expected performance; lower executable order book to impact growth

(IRB IN, Mkt Cap USD0.7b, CMP INR133, TP INR130, 2% Downside, Neutral)

 

• Operating performance ahead of expectations: Revenues grew a healthy 41% YoY to INR19.5b (ahead of our est. of INR18.1b), supported by strong growth in Construction revenue (+59% YoY to INR14.1b) and increase in BoT revenue (+9% YoY to INR5.4b). Operating profit grew 15% YoY to INR7.6b (ahead of our est. of INR7.3b) with margins shrinking 8.7pp YoY to 39% due to contraction in Construction margins (21.4% v/s 26.8% in 4QFY18). Adjusted profit declined 13% YoY to INR2.1b (below our est. of INR2.2b).
• EPC revenue growth dependent on BoT/HAM projects' appointed date: EPC revenue for FY19 grew 20% YoY to INR45.3b, with EBIDTA growth of 2% YoY to INR11.1b. For FY20, IRB expects EPC revenue to grow 30-35% YoY (INR61b at upper end of guidance); we believe this is heavily dependent on availability of the four BoT/HAM projects for which appointed date is still pending. Current order book of IRB stands at INR111b, of this, order book worth INR63b is yet to receive appointed date. Thus, any meaningful delay in receiving the appointed date can impact its EPC revenue growth guidance of 30-35% for FY20. We have penciled in EPC revenue growth of 21% for FY20.