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IRB Infrastructure 2QFY2013 performance highlights and results update

Contributed by Angel Broking

For 2QFY2013, IRB Infrastructure (IRB) reported a modest set of numbers. The companyRs.s revenue came slightly below our expectation, but owing to better-than-expected performance at the EBITDAM level, earnings were higher than estimates. IRB is looking at both organic and inorganic options for growth with a threshold of 18% equity IRR and intends to allot 20% of consolidated cash flow post debt repayment towards acquisitions. In accordance with its strategy to declare ~20% of post-tax consolidated profit towards dividend, IRB declared an interim dividend of Rs.1/share.

Better-than-expected performance at the EBITDAM level: IRB reported a consolidated revenue growth of 14.9% yoy to Rs.845cr against our estimate of Rs.900cr. This uptick in revenue was mainly due to improved execution in under construction projects. E&C segmentRs.s revenue grew by 17.8% yoy to Rs.622cr and BOT segment witnessed a 7.7% growth to Rs.257cr. On the EBITDAM front, IRBRs.s margin came in at 45.0% a jump of 135bp on a yoy basis, higher than our estimate of 43.3%. Stable input prices led to an EBITDAM of 27.3% (excluding other income) for E&C segment. The interest cost came in at Rs.148cr, registering a jump of 4.9% on a yoy basis. At the earnings front, IRB reported a growth of 9.9% to Rs.121cr, above our estimate of Rs.106cr on account of better-than-expected performance on the EBITDAM front and lower tax rate.

Outlook and valuation: IRB has a robust order book of Rs.7,466cr (2.9x FY2013E E&C revenue, excluding O&M orders), which lends revenue visibility. Although a slowdown in order awarding by NHAI in road sector has been witnessed in 1HFY2013 IRB expects ordering activity to improve going ahead. The stock trades at FY2013 and FY2014 P/B of 1.2x and 1.1x respectively. We maintain our Buy view on the stock with a target price of Rs.164.