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ITNL 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, on a consolidated basis, IL&FS Transportation Networks (ITNL) posted a strong performance on the top-line and EBITDAM fronts. The robust performance was on account of higher-than-expected revenue growth, led by E&C revenue. However, higher interest cost and tax provision led to a subdued growth at the bottom-line level. 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.

Robust performance continues: ITNL reported a revenue of Rs.1,764cr in 3QFY2013 (Rs.1,268cr in 3QFY2012), registering a yoy growth of 39.1%, which is 12% higher than our estimate. This is mainly on account of increased contribution from the E&C segment. The EBITDA margin declined sequentially by 754bp to 25.5% in 3QFY2013 (against our estimate of 28%) vs 25.3% in 3QFY2012. ITNL’s interest cost grew by 53.3% yoy to Rs.284cr for the quarter and was marginally above our estimate of Rs.280cr. On the earnings front, ITNL reported a subdued growth of 18.5% yoy to Rs.104cr (our estimate was of Rs.108cr) on back of higher interest cost and tax provision (40%) during the quarter.

Outlook and valuation: Going forward, we expect ITNL to report revenue CAGR of 12% over FY2012-14. This would be on the back of an order book of Rs.9,795.5cr (excluding L1 orders of Rs.2,344cr), indicating order book-to-sales ratio of 1.5x trailing revenues. The stock trades at a P/BV of 1.2x and 1.1x for FY2013E and FY2014E, respectively. We recommend Accumulate rating with a SOTP-based target price of Rs.225.