>IVRCL INFRASTRUCTURES & PROJECTS LIMITED (ANAGRAM)

Company Background

Incorporated in 1987, IVRCL is a Hyderabad based construction company, present in most of the verticles of infrastructure space like Water & Irrigation, Transportation, Power T&D and Buildings and Industrial structures. The company is betting big on irrigation and water opportunity in India and has maintained its un-disputed leading position in the segment. Acquisition of Hindustan Dorr Oliver has improved its presence in water and environmental engineering space. Going forward, the management has given indication of tapping upcoming opportunity in power transmission.

Infrastructure Industry –Opportunities Unlimited
There is a little doubt that the infrastructure industry in India is to play a vital role in nation's progress towards achieving the status of a 'developed nation'. The government has realized that the infrastructure related inadequacies will put a significant constraint in realizing the nation's growth potential. Consequently, the planned investment in the 11th five year plan is 136% higher over the anticipated investment in the 10th five year plan. Irrigation, roads and highways and power have witnessed 129%, 117% and 127% growth in the 11th five year plan and account for almost 60% of the total outlay. With the new government in place, there are strong expectations that going forward these infrastructure initiatives will get a further emphasis in terms of execution and incremental investments.

Healthy Order Book Provides Revenue Visibility
The current order book of the company stands at Rs 13900 Cr with a further Rs 1000 Cr of projects having L1 status. Irrigation projects account for 69% of the total followed by 22% contribution from Buildings and Industrial Structures unit. Going forward we expect the order book to witness robust growth mainly from the order wins in Irrigation, power and road sector.

Valuation
We believe that IVRCL will continue tapping huge opportunities in irrigation and water related projects. While over the past couple of years the company has strengthened its position in Buildings and Industrial Structures segment, going forward, power transmission and roads related projects will increasingly contribute to the growth.The core construction business of the company is valued at Rs 363 per share by assigning forward multiples to FY11E EPS. The two listed subsidiaries IVR Prime and HDO are valued at CMP and contribute Rs 42.8 and Rs 19.8 per share respectively. The 4 BOT projects are valued at Rs 28.7 per share. We had given OUTPERFORMER rating on the stock in our Q1FY10 Earnings Review report (14th Aug 2009, Price Rs 318). Investors who had already invested in IVRCL Infra can continue holding it while others can look at the stock on declines.

We remain bullish on IVRCL and retain OUTPERFORMER rating with the SOTP based 12 months price target of Rs 465.

To see full report: IVRCL