IRB INFRASTRUCTURE DEVELOPERS LIMITED (EMKAY)

Upgrading price target

IRB Q1FY10 results are above expectations on account of better than expected topline in both (BOT and Construction segment) and higher other income (gain on sale of debt investments). Revenues for the quarter grew by 80% yoy to Rs4.14 bn (our estimates Rs3.7 bn), driven by 121% growth in construction revenues and 44.4% growth in revenues of BOT segment. EBIDTA for the quarter at Rs1.66 bn (our estimates (Rs1.52 bn) grew at 41.5% yoy, driven by 46% growth in BOT EBIDTA and 75% growth in Construction EBIDTA. Net profit for the quarter at Rs814.6 mn grew 50.5% yoy, higher our estimates of Rs672.3 mn. On account of increase in MAT to 15% in union budget 2009-10, we are downgrading our earnings by 9% to Rs9.8/share for FY2010. We are introducing our FY2011 earnings at Rs13.2/share, factoring in the increased revenue from E&C segment on account of the recently bagged 4 BOT project worth Rs43 bn. We have upgraded IRB fair value from Rs145 earlier to Rs195, on the back of addition of four BOT projects that IRB has recently bagged. Maintain ACCUMULATE rating.

Result highlights

■ IRB Q1FY10 results are above on account of better than expected topline in both (BOT and Construction segment) and higher other income (gain on sale of debt investments).

■ Revenues for the quarter grew by 80% yoy to Rs4.14 bn (our estimates Rs3.7 bn). driven by 121% growth in construction revenues and 44.4% growth in revenues of BOT segment. Growth in BOT segment was mainly on account of contribution from the new Surat – Dahisar project where the tolling started from February 2009.

■ The Mumbai-Pune project saw revenue growth of 5.9%. BOT revenue growth on a like to like basis (excluding Surat Dahisar, Bihwandi Wada and Khabhbatki Ghat) was at 4%. Since there has been no toll rate hike this year we presume the entire growth is driven by growth in traffic volumes.

■ Growth in construction segment was on account of execution of new projects like Surat Dahisar and Kolhapur project, which were not there last year.

■ EBIDTA for the quarter stood at Rs1.66 bn (our estimates (Rs1.52 bn) grew at 41.5% yoy, driven by 46% growth in BOT EBIDTA and 75% growth in Construction EBIDTA.EBIDTA growth was lower than the revenue growth as the share of construction business (EBIDTA margins of 18.4% as compared to BOT EBIDTA margins of 85%) was at 63% as compared to 53% in Q1FY2009. Consequently EBITDA margin for the quarter at 40.1% declined by 1090 bps.

■ EBITDA margins for the construction business decline by 481 bps on account of lower share of high margin funded construction. Consequently Construction EBIDTA grew by 75% to Rs505 mn. BOT EBIDTA margins at 85.3% improved 104 bps yoy and hence BOT EBIDTA grew by 46.1% yoy.

To see full report: IRB INFRASTRUCTURE