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FII

26%

Institutions

3%Promoters

61%Public &

others10%

406080

10 012 0

14 016 018 020 0

M a y - 1

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A u g - 1

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N o v - 1

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F e b - 1

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M a y - 1

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investors eye stock update

Company details

Price chart

Shareholding pattern

Price performance

(%) 1m 3m 6m 12m

Absolute 54.6 136.4 117.6 50.2

Relative 44.7 101.1 80.4 22.3to Sensex

IRB Infrastructure Developers Reco: Buy

Stock Update

Improving growth outlook; Buy maintained CMP: Rs187

Price target: Rs221

Market cap: Rs6,205 cr

52 week high/low: Rs192/52

NSE volume: 33.2 lakh(no. of shares)

BSE code: 532947

NSE code: IRB

Sharekhan code: IRB

Free float: 12.7 cr(no. of shares)

Result highlights

IRB Infrastructure Developers (IRB) reported a net profit decline of 28% onaccount of a weak performance of the construction business (-16% YoY) and asurge in the higher interest expenses (after commissioning of the Jaipur-Deoliproject) in Q4FY2014. On the positive side, the revenues from the BOT roadsegment improved considerably (up 14% YoY) resulting in a 548-BPS improvementin the overall margin.

The companys order book has swelled to Rs11,974 crore (inclusion of Rs5,500crore projects bagged recently) providing a construction revenue visibility over

the next three to four years. The tariff revision in some projects from April 1,2014, along with an improvement in the traffic is expected to drive the BOTrevenues.

IRB is well funded to meet the Rs2,900 crore equity requirement over the nextthree years with internal accruals. We believe IRBs earnings visibility over thenext two years has improved significantly. We maintain our Buy rating on thestock with a price target of Rs221. We have not factored in our valuation forthree new projects bagged recently, which are awaiting financial closure andclarity on the tariff and traffic estimates.

Results (consolidated) Rs cr

Particulars Q4FY14 Q4FY13 YoY % Q3FY14 QoQ %

Net sales 882.9 948.3 -6.9 877.2 0.6

Other income 35.2 31.8 10.5 28.7 22.6

Total income 918.0 980.1 -6.3 905.9 1.3

Total expenses 440.9 525.5 -16.1 442.3 -0.3

Operating profit 442.0 422.8 4.5 434.9 1.6

Depreciation 119.3 109.4 9.0 112.1 6.4

Interest 209.9 157.5 33.2 204.2 2.8

Profit before tax 148.0 187.7 -21.1 147.3 0.5

Taxes 37.9 33.7 12.5 38.7 -2.1

PAT 110.1 154.0 -28.5 108.6 1.4

Minority interest 0.9 2.9 -68.1 0.1 926.6

Consolidated PAT 109.2 151.1 -27.7 108.5 0.7

No of equity shares 33.2 33.2 0.0 33.2 0.0

EPS 3.3 4.5 -27.7 3.3 0.7

OPM (%) 50.1 44.6 548 BPS 49.6 49 BPS

NPM (%) 12.4 15.9 -357 BPS 12.4 0 BPS

Tax rate (%) 25.6 17.9 765 BPS 26.3 -67 BPS

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BOT segment drives revenues; higher interest chargeaffect profitability: In Q4FY2014, IRBs consolidatedrevenues declined by 6.9% year on year (YoY) to Rs883crore owing to a year-on-year (Y-o-Y) decline of 16.0%in the construction revenues. The build-operate-transfer (BOT) segment reported a 13.7% Y-o-Y growth

in the revenues. The construction segment reported adecline on account of the completion of the Tumkur-Chitradurga project during Q2FY2014. The operatingprofit margin (OPM) expanded by 548 basis points (BPS)YoY to 50.1% on account of a higher contribution fromthe BOT segment. Subsequently, the earnings beforeinterest, tax, depreciation and amortisation (EBITDA)rose by 4.5% YoY. During the quarter, the interestexpense grew by 33.2% YoY on account of the inclusionof the Jaipur-Deoli project during Q3FY2014.Consequently, the consolidated net profit declined by27.7% to Rs109 crore.

Construction segment reports decline in revenuesas expected: The revenues from the constructionvertical declined by 16.0% YoY to Rs568 crore onaccount of the completion of the Tumkur-Chitradurgaproject during Q2FY2014. The construction revenuescomprised mainly from the Ahmedabad-Vadodaraproject along with Amritsar-Pathankot, Jaipur-Deoliand Talegaon-Amravati projects. Further, the quarteralso witnessed a stable or range-bound movement inthe raw material prices as a result of which the marginexpanded to 30.0% in Q4FY2014 from 28.6% in

Q4FY2013.

BOT division posts stellar performance: The BOTdivision registered a robust performance with therevenues rising by 13.7% YoY to Rs315 crore. The growthwas largely led by the toll revenues in the Pune-Solapur,Ahmedabad-Vadodara, Surat-Dahisar, Omallur-Namakkal and Tumkur-Chitradurga projects which grewby 6-16% YoY during Q4FY2014. Consequently, at theoperating level the segment witnessed an increase of about 176BPS YoY in the margin to 86.3%. Overall, thetraffic growth across projects was 4-5% YoY.

Maintain Buy with price target of Rs221: IRB is wellfunded to meet the Rs2,900 crore equity requirementover the next three years with internal accruals. Webelieve IRBs earnings visibility over the next two yearshas improved significantly. We maintain our Buy ratingon the stock with price target of Rs221. We have notfactored in our valuation for three new projects baggedrecently, which are awaiting financial closure andclarity on the tariff and traffic estimates.

Strong order book at Rs11,674 crore provides revenuevisibility over the next three to four years

At the end of Q4FY2014, the company reported an orderbook of Rs11,674 crore, which provides a good revenuevisibility for the next three to four years. The companyrecently bagged two projects, Yedeshi-Aurangabad and

Kaithal-Rajasthan, aggregating Rs5,500 crores, which isexpected to start contributing towards the constructionincome from Q4FY2015 onwards. While the Solpapur-Yedeshi project is likely to contribute from H2FY2015onwards. Consequently, the company expects theconstruction income to grow at 10% YoY for FY2015.

Order book composition as of Q4FY2014

O&M contracts16%

Kaithal RajasthanBorder

17%

YedeshiAurangabad

23%

Solapur Yedeshi11%

Goa/ KarnatakaBorder

Kundapur19%

Sindhudurg airport3%

Ahemdabad-Vadodara

11%

Valuations

Particulars FY12 FY13 FY14 FY15E FY16ESales (Rs cr) 3,130.5 3,687.2 3,731.9 4,364.1 4,926.8

Growth Y-o-Y % 28.4 17.8 1.2 16.9 12.9

EBITDA (Rs cr) 1,373.3 1,633.3 1,753.7 1,999.7 2,276.3

Margins % 43.9 44.3 47.0 45.8 46.2

Adj. net profit (Rs cr) 495.8 556.7 459.1 464.6 506.7

Growth Y-o-Y % 9.6 12.3 (17.5) 1.2 9.1

Shares in issue (cr) 33.2 33.2 33.2 33.2 33.2

EPS (Rs) 14.9 16.7 13.8 14.0 15.2

Growth Y-o-Y % 9.6 12.3 (17.5) 1.2 9.1

PER (x) 12.5 11.1 13.5 13.4 12.2

Book value (Rs) 86.0 98.0 107.1 116.4 127.0

P/BV (Rs) 2.2 1.9 1.7 1.6 1.5

RoCE (%) 13.9 11.9 10.4 10.6 11.6

RoNW (%) 18.7 18.2 13.5 12.5 12.5

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BOT revenues Rs cr

Toll collections Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY % QoQ %

Mumbai-Pune 103.7 108.9 109.5 110.3 109.0 5.1 -1.2

Pune-Nashik 5.9 5.9 5.7 5.7 5.5 -6.8 -3.5

Pune-Sholapur 4.6 4.7 4.1 4.8 5.3 15.2 10.4

Thane-Bhiwandi & Kaman-Paygaon 18.1 18.4 15.3 17.3 18.2 0.6 5.4

Thane-Ghodbunder 8.0 8.6 8.8 8.9 6.5 -18.8 -27.0

Kharpada Bridge 2.2 2.3 1.8 2.0 2.1 -4.5 5.0

Ahmednagar-Karmala-Temburni 3.6 3.6 3.6 3.5 3.4 -5.6 -2.9

Mohol-Kurul-Kampti-Mandrup 1.7 1.7 1.7 1.5 1.5 -11.8 0.0

Surat-Bharuch 44.3 40.2 39.8 42.6 44.0 -0.7 3.3

Surat-Dahisar 119.6 117.2 115.0 127.0 128.7 7.6 1.3

IRDP Kolhapur 1.9 -

Jaipur-Deoli 0.7 15.0 18.6 24.0

Talegaon-Amravati 5.1 6.5 7.2 7.7 6.9Tumkur-Chitradurg 39.4 38.9 39.9 42.5 41.7 5.8 -1.9

Ahmedabad-Vadodara 29.1 28.8 26.8 32.6 33.7 15.8 3.4

Omallur Salem -Namakkal 14.6 14.7 14.5 15.4 16.6 13.7 7.8

Total 395 399 394 438 443 12.1 1.0

Segment-wise performance Rs cr

Particulars Q4FY2014 Q4FY2013 Y-o-Y % Q3FY2014 Q-o-Q %

Revenues

Construction 568.2 676.4 -16.0 565.9 0.4

BOT 314.8 276.8 13.7 311.3 1.1

Total 883.0 953.3 -7.4 877.2 0.7

EBITDAConstruction 170.3 193.6 -12.1 162.4 4.8

BOT 271.9 234.1 16.1 272.5 -0.2

Total 442.2 427.8 3.4 434.9 1.7

EBITDA margin (%)

Construction 30.0 28.6 135 BPS 28.7 127 BPS

BOT 86.3 84.6 176 BPS 87.5 -116 BPS

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