MOSL: IRB INFRASTRUCTURE (Neutral)-Operating performance below expectations-EPC segment disappoints

IRB Infrastructure: Operating performance below expectations; EPC segment disappoints

(IRB IN, Mkt Cap USD1.0b, CMP INR202, TP INR225, 11% Upside, Neutral)

• Operating performance below expectations: IRB’s revenue declined 15% YoY to INR15.4b, below our estimate of INR19.9b due to weaker-than-estimated EPC revenue. Operating profit declined 9% YoY to INR7.5b, below our estimate of INR9.3b. Operating margin expanded 350bp YoY to 48.5%, led by better performance in the BoT segment (65.3% against 54% in 1QFY18). Adjusted profit was in-line at INR2.5b on account of lower-than-estimated interest and depreciation charges.
• Toll revenue from continuing projects muted; key project, Mumbai-Pune impacted by diversion of traffic: Toll revenue from continuing projects was INR3.8b against INR3.7b in 1QFY18 (+5% YoY). New projects contributed another INR1.6b, taking total toll revenue for the quarter to INR5.4b. Toll revenue from continuing projects was impacted, as toll collection at the key project, Mumbai-Pune was flat – closure of Mumbra bypass for repair works impacted daily traffic by 1.2m-1.4m. Even traffic at Agra-Etawah declined 6.3% YoY on diversion of traffic at Agra-Lucknow highway, which has started tolling at concessionary rate of 75%. IRB expects toll collection to improve in upcoming quarters.