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IVRCL 3QFY2012 performance highlights and results update

Contributed by Angel Broking

IVRCL reported a disappointing set of numbers for 3QFY2012, with lower-thanexpected performance on all fronts. However, order inflow for 9MFY2012 was commendable at Rs.10,700cr, given the current scenario. The company’s order book stands at Rs.25,000cr (4.4x FY2011 revenue, including L1 projects of Rs.3,000cr). During the quarter, IVRCL Assets and Holdings has sold its Noida land (3 parcels out of 4) and is expecting to receive the cash to the tune of Rs.225-300cr by March 2012. Further the company expects to divest stake in one road BOT project for ~Rs.100-175cr in near term. This development is positive for the company as it will help to fulfill its equity commitment towards four under construction road BOT projects in FY2013 (excluding Sion Panvel, Raipur Bilaspur and Haryana projects). We recommend Accumulate on the stock with a revised target price of Rs.64 (Rs.56).

Poor show on numbers front: IVRCL’s revenue declined by 15.1% yoy to Rs.1,203cr, below our estimate of Rs.1,374cr. On the EBITDAM front, the company posted dismal margin of 7.9% (9.9%) and below our estimate of 9.2% as fixed overheads were not absorbed fully due to low turnover. Interest cost came in at Rs.66.1cr, an increase of 11.6% yoy/1.3% qoq, lower than our expectations. On earnings front, IVRCL reported an 84.0% yoy decline to Rs.6.8cr, against our estimate of a ~47% decline. This was on primarily on account of poor performance on the revenue and margin front.

Outlook and valuation: We are revising our estimates downwards for FY2012 to factor in the poor quarterly performance. However, land monetization and improvement in working capital for FY2013 will ease debt requirement for FY2013 leading to savings on interest cost. The stock price of IVRCL has seen tremendous rally in last 3 months and captured near term positives (strong order inflow and easing on debt front) to some extent. Further, management is not confident of clocking 15-20% revenue growth for FY2013 given headwinds. Hence we recommend Accumulate on the stock.