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IL&FS Transportation Networks 3QFY2014 performance highlights and results update

February 14, 2014, Friday, 17:47 GMT | 12:47 EST | 22:17 IST | 00:47 SGT
Contributed by Angel Broking

For 3QFY2014, IL&FS Transportation Networks (ITNL) reported a good set of numbers which were above our estimates on both- revenue and profitability fronts. ITNL reported a good performance on the top-line front owing to pick up in execution in its under construction projects, while earnings were ahead our estimate mainly due to better-than-expected execution and tax reversal during the quarter. With the company being a market leader in its segment, having a robust order book and diversified portfolio, we believe it is well placed to leverage on the upcoming opportunities in the road sector.

Strong performance: ITNL’s consolidated revenue increased by 11.4% yoy to Rs.1,966cr in 3QFY2014, which was above our estimate of Rs.1,819cr. The strong performance on the revenue front was mainly on account of (a) increase in O&M income, (b) growth in toll/annuity income and (c) pick up in execution in its under construction projects during the quarter. The EBITDA margin decreased sequentially by 1,242bp to 24.8% in 3QFY2014 (25.5% in 3QFY2013), against our estimate of 28.0%. This was mainly on account of increase in construction expense (up 6% yoy) and employee cost (up 28% yoy) during the quarter. On the earnings front, ITNL reported a subdued growth of 5.5% yoy to Rs.110cr against our estimate of Rs.105cr mainly on account of better-than-expected revenue performance and tax reversal during the quarter.

Outlook and valuation: Going forward, we expect ITNL to report a revenue CAGR of 9.5% over FY2013-15. This would be on the back of an order book of ~Rs.12,000cr, indicating order book-to-sales ratio of 1.8x trailing revenues. We have revised our FY2014E and FY2015E EPS to Rs.24.3/share and Rs.28.4/share respectively. The stock trades at a P/BV of 0.5x and 0.5x for FY2014E and FY2015E, respectively. We recommend a Buy rating on the stock with a SOTP-based target price of Rs.156.