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Hold IRB Infrastructure; target of Rs 250: ICICI Direct

November 16
00:41 2017

ICICI Direct’s research report on IRB Infrastructure

IRB Infrastructure’s (IRB) topline de-grew 13.0% YoY to Rs 1122.7 crore (our estimate: Rs 1336.7 crore) due to sharp drop in toll revenues as seven BOT assets were transferred to InVIT EBITDA margins declined sharply by 395 bps YoY to 51.0% (our estimate: 47.0%) due to higher proportion of revenues from low margin construction division (66.8% in Q2FY18 vs 56.5% in Q2FY17) PAT grew robustly by 65.0% YoY to Rs 234.7 crore (our estimate: Rs 195.8 crore) due to higher other income (Rs 146.5 crore in Q2FY18 vs. Rs 33.6 crore in Q2FY17). Other income was higher as IRB booked a profit of Rs 104.1 crore on transfer of Amritsar-Pathankot project to IRB InVIT. Adjusting for profit on sale of the investment, IRB’s PBT stood at Rs 253 crore vs. our expectation of Rs 279.8 crore.

Outlook

IRB’s construction revenues are expected to grow strongly, with strong execution ahead. However, toll revenues from Ahmedabad-Vadodara project continues to remain weak as the project has been impacted due to diversion of traffic to a parallel state road. Going forward, we would look to closely monitor this project as this project has dragged our valuation significantly. Consequently, we continue to maintain our HOLD recommendation on the stock with a revised SOTP based target price of Rs 250 per share.

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